Vanuatu Wants Its Financial Dealers to Move Onshore

• The Vanuatu Financial Services Commission has beefed up the requirements for FDL holders.

• “Vanuatu wants to bring about a sea change in the way it does business,” St-Hilaire says.

The Vanuatu Financial Services Commission (VFSC) has significantly beefed up the requirements for FDL holders, including the physical presence of at least one direct employee who matches a 'fit and proper' definition. Those who deal in digital assets, in which trading was legalized this July, must have three people onshore, one of whom is the CTO, along with a minimum capital of US$500,000, a custodianship license from another jurisdiction and an established track record.

Seeking a Commitment

“In other words, a single P.O. Box and some accounting entries wont cut it anymore to operate in Vanuatu. Our government wants to bring the offshore industry back onshore to spur investment in the country, create jobs, stimulate further development, and support education and training,” says Martin St-Hilaire, the Chairman of the Financial Markets Association of Vanuatu (FMA Vanuatu) representing FDL holders. “We look forward to seeing financial brokers open up offices in Vanuatu and hire and train staff locally.”

In a set of 'guidance notes' issued in recent months, the VFSC established four categories of licenses: FX deliverable and debt instruments (Cat. A); corporate shares, precious metals or commodities (Cat. B); futures contracts and derivative products (Cat. C); and digital assets (Cat. D.). The last is for the brokerage of digital assets, not their issuance, Initial Coin Offerings will not be authorized.

Put Your Money Where Your Mouth Is

Since the end of October, brokers can apply for licenses in the A, AB, ABC or ABCD categories – meaning that applicants for D must apply for all four. A one-time bond deposit of 5 million Vatu (approx. USD 45,000) is also required. Once granted, the licenses will never have to be renewed; they will be perpetual with the VFSC reserving the right to revoke them at any time for non-compliance with the law. Existing licensees will have until October 16, 2022, to comply.

There is one exception to the physical presence requirements: small brokers with limited activity will be authorized to designate a Licensed Resident Manager, i.e., hire a local consultant, instead of moving onshore. But, the regulator views this as a “temporary solution for the little guy,” according to St-Hilaire.