Vanuatu’s Financial Transformation: A Path to Becoming the Next Cyprus in the Brokerage Industry
Vanuatu, a small island nation in the Southwest Pacific, aims to position itself as a major player in the global brokerage industry. With recently implemented stricter licensing rules, the jurisdiction is determined to trade quantity for quality and emulate the success of Cyprus, a renowned fintech and financial brokerage hub.
A Shift Towards Quality
Just five years ago, Vanuatu boasted 600 active Financial Dealer Licenses (FDL). However, with the enforcement of more stringent licensing rules in 2021, the number has significantly decreased to a core group of 60 brokers. These brokers have successfully met the regulatory requirements, including mandatory physical presence and economic substance in Vanuatu.
Four Types of Licenses
The rebooted Vanuatu FDL program now offers four types of license to cater to various financial activities:
- Class A: For FX deliverables and debt instruments.
- Class B: Encompassing corporate shares, precious metals, and commodities.
- Class C: Pertaining to future contracts and derivative products.
- Class D: Specifically designed for digital assets.
Comprehensive Regulatory Requirements
To ensure transparency and accountability, the Vanuatu Financial Services Commission (VFSC) now enforces a range of requirements for licensees, including:
- Operation of a local office and maintenance of software systems.
- Appointment of at least one full-time manager with executive powers for onsite operations.
- Inclusion of a director with financial experience who is a resident or citizen of Vanuatu.
- Maintenance of professional insurance worth at least US$500,000.
- Submission of a US$50,000 bond to the VFSC.
- Registration as a reporting entity with the Vanuatu Financial Intelligence Unit.
- Implementation of an extensive Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) policy with effective controls.
From Offshore to Onshore
Vanuatu has transitioned from being an offshore, protected international financial center to an onshore, transparent international fintech and financial brokerage hub. The days of establishing a presence through a simple P.O. Box and accounting entries are over. The jurisdiction now emphasizes the tangible contribution of brokers to the local community and demands their physical presence in Vanuatu.
The Influence of Cyprus
Industry insiders view Cyprus, a small island nation, as an inspiration for Vanuatu’s future. Vanuatu’s Financial Markets Association (FMA), established in 2020 to promote professional and ethical standards, has attracted renowned global players such as Deriv, Exness, Forex Chief, and FX Primus, among others. These brokers have set up operations in Port Vila, the capital city, fostering collaboration and industry growth.
Valuable Resources and Partnerships
The FMA’s website provides a wealth of resources for brokers and traders, including:
- A list of currently authorized brokers.
- Information on revoked, lapsed, or rejected licenses.
- A fraud warning page to combat false claims of VFSC endorsement.
- Guidance on compliance with AML-CFT and corporate social responsibility (CSR) requirements, as well as employment opportunities in Vanuatu.
The FMA also collaborates with The Financial Commission, an organization based in Hong Kong that offers mechanisms for dispute resolution.
The FMA aims to expand its services and collaborate with the VFSC to continuously enhance Vanuatu’s regulatory framework. The ultimate goal is to attract serious players in the brokerage industry while effectively deterring bad actors. With elevated monitoring and regulatory systems aligned with global standards, Vanuatu’s licensees will be recognized as businesses that uphold the highest professional and ethical standards.
Vanuatu, with its transformed financial landscape and growing pool of local knowledge and expertise, aspires to become a vibrant fintech and brokerage hub similar to Cyprus. As the world acknowledges its commitment to stringent regulations, Vanuatu is ready to take on the global stage as a serious contender in the brokerage industry.