We recently caught up with Elise Donovan, chief executive of BVI Finance, about the lessons learned from a recent report on IFCs, digital assets, and other topics. With the world being in such an uncertain state, the much-touted demise of offshore centres appears more mistaken than ever before.

The British Virgin Islands “brand” is so powerful today that the Caribbean financial jurisdiction says it can count on an international network of BVI specialists, giving it considerable cross-border appeal.

The use of IFCs such as the BVI was spelled out by the island earlier in the summer when it unveiled a report saying that 94 per cent of fintech executives consider that cross-border growth is either critical or important to their success. The BVI said it has pushed hard to demonstrate its work in areas such as fintech, including digital assets.

“We provide the global plumbing that provides significant trade and investment,” Elise Donovan, CEO, BVI Finance, told WealthBriefing after the report came out. “You will find a plethora of BVI professionals around the world, such as in the UK, doing BVI business. There are hundreds of such professionals in Hong Kong, and it is also the same in Singapore.”

“Having this global network and expertise is a differentiator,” she said. Many corporate entities in Hong Kong, for example, often involve a BVI structure. In previous years, such entities have accounted for the second largest slice of all foreign direct investment into the Hong Kong/mainland China region, Donovan said.

In Asia, “BVI” is the name for incorporating offshore, she said. 

The British Virgin Islands

Fintech and digital assets
The Destination Digital Report examined, among other topics, the difficulties caused by a fragmented and ever-changing regulatory landscape, particularly in the digital assets space. The British Virgin Islands brought the Virtual Assets Service Providers Act, 2022 (“VASP Act”) into effect in February 2023.

The BVI implemented a measured approach, balancing caution without stifling innovation. “Working with the financial services industry, and closely aligning with FATF standards, the BVI’s regulation allows for clarity and international portability, making the BVI a leading jurisdiction for VASPs,” Donovan said

Fragmented rules
Donovan reflected on the patchwork of rules that players in areas such as digital assets must contend with. 

“Fintech and digital asset companies’ cross-border models are susceptible to regulatory shifts and disparity between markets,” she said. “The fragmented approach to regulation and compliance across the globe, from the pro-crypto and blockchain administration in the US, to the UK publishing draft legislation for crypto assets and the EU’s Markets in Crypto-Assets Regulation, there is no consistent regulatory approach for fintech businesses to work to,” Donovan said. 

“Our Destination Digital report revealed that over a quarter (28 per cent) of global fintech executives say navigating complex and ever-changing regulations is a key issue for their business – particularly burdensome for those operating across multiple markets, where differing standards and governance structures can create inefficiencies and increase costs,” she said. “When considering regulatory challenges, 32 per cent of fintech leaders emphasise the importance of a jurisdiction with a clear licensing framework for fintech and virtual assets.”

Donovan said fintech and crypto businesses want regulatory certainty. 

“Predictable licensing, clear rule enforcement and cross-border recognition all enable informed long-term planning and allow these businesses to instead focus on delivering new products and services to customers as quickly as possible,” Donovan said. “With the focus on finding a jurisdiction to incorporate that offers certainty and stability, the BVI stands out due to its favourable regulatory environment and flexible company and partnership laws, facilitating efficient business operations and exits.”

This publication asked Donovan what she thinks is the greatest opportunity for the BVI today and in the next two years.

“The largest opportunity for the BVI is the growing global consensus that decentralised models will shape the next era of financial innovation. Our Destination Digital report revealed that 44 per cent of global fintech firms consider blockchain or distributed ledger technology (DLT) as fundamental to their operations,” she replied. “Notably, the research revealed that the reliance on DLT increases to 54 per cent among early-stage startups, with significant uptake in key jurisdictions such as the UK (45 per cent), Hong Kong (41 per cent), Singapore (41 per cent), and China (43 per cent).

"However, only 31 per cent of business leaders say they have a fully-

developed legal entity for governing on-chain activities. Even fewer, at 26 per cent, believe that current IFC legal frameworks sufficiently address the governance risks associated with Decentralised Autonomous Organisations (DAOs),” Donovan said.

She added: “it is clear that the shift towards decentralised finance is happening at an unprecedented and global scale.”

Amid geopolitical and other disturbances, Donovan said jurisdictions such as the BVI are more credible than ever. “During conflict and inflammatory rhetoric, IFCs maintain a neutral stance, making them attractive locations for businesses from all over the world. By adhering to international regulatory standards and participating in global efforts to enhance transparency and combat financial crimes, these jurisdictions enhance their credibility and remain a trustworthy partner in the international financial community,” she added.