Vanuatu has become the latest country with a proper legal framework for cryptocurrencies, as its Parliament last week passed the Virtual Asset Service Provider (VASP) Act. Now, virtual assets are defined in the country as “digital representations of value that may be traded and function as a medium of exchange, a unit of account, or a store of value.”

However, the legislation does not cover digital representations of fiat currencies, securities, and national digital currencies, including central bank digital currencies (CBDCs). The announcement further highlighted that despite the regulations, cryptocurrencies are not legal tender in the country.

“The VFSC, however, acknowledges that, albeit reliant upon market demand and supply, virtual assets and cryptocurrencies have ‘value’ since they are exchangeable for other assets having value,” the press release noted.

A Proper Crypto Regulatory Framework

Vanuatu finalised the legal framework for crypto years after the Vanuatu Financial Services Commission (VFSC) initiated its efforts in this specific area. The VFSC will be the agency that regulates the local crypto industry.

The island's crypto legislation further ensures compliance with international standards, including the Financial Action Task Force’s (FATF) “travel rule” policy. With proper legislation in place for the crypto industry to follow, Vanuatu is now hopeful that it will open up “numerous opportunities… both economically and socially.”

“Economically, the VASP Act establishes a stable regulatory framework for digital business transactions,” the announcement added. “This encourages healthy competition, attracts investment, reduces business costs, and ensures consumer protection. It also offers many potential benefits, including greater speed, lower cost, and increased efficiency in making virtual asset transactions, including cross-border payments, with the potential to improve financial inclusion.”

Offshore Jurisdictions Aim to Attract Crypto

Earlier this month, the Cayman Islands updated its crypto regulatory regime, introducing new licensing rules through a legislative amendment. From 1 April 2025, entities offering virtual asset custody and trading platform services in or from the Islands must obtain a licence.

Interestingly, both Vanuatu and the Cayman Islands are popular offshore destinations for forex and contracts for differences (CFDs) brokers, as they obtain licences from these jurisdictions to offer services globally. Now, these islands aim to follow the same approach to attract crypto companies. Meanwhile, Vanuatu in 2023 mandated brokers operated from the island to have onshore presence.

This article was written by Arnab Shome at www.financemagnates.com.