Virgin Islands (U.S.)

**Report: Retail Cryptocurrency Trading Status in the U.S. Virgin Islands**

**Date:** April 12, 2025

**Topic:** Retail_Trading_Status

**Description:** Assess whether individual citizens and residents in the country are legally permitted to buy, sell, and hold cryptocurrencies. Detail the regulatory environment surrounding this activity (e.g., KYC/AML requirements imposed on platforms, general warnings issued).

---

**1. Current Status:** `Allowed-Regulated`

**2. Detailed Narrative Explanation:**

Retail trading of cryptocurrencies (buying, selling, holding by individuals) is generally permitted for residents of the U.S. Virgin Islands (USVI), but it operates within a complex regulatory environment primarily dictated by U.S. federal law, alongside specific local considerations. The USVI, as an unincorporated territory of the United States, is subject to federal financial regulations unless specific local laws supersede them.

*   **Federal Oversight:** U.S. federal agencies play a significant role in regulating aspects of cryptocurrency activities that affect USVI residents:
    *   **FinCEN (Financial Crimes Enforcement Network):** Treats virtual currency exchanges and administrators as Money Services Businesses (MSBs) under the Bank Secrecy Act (BSA). This requires platforms serving U.S. persons (including those in USVI) to register with FinCEN, implement robust Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) programs, and adhere to Know Your Customer (KYC) requirements. These regulations directly impact retail users, who must typically provide identification to use regulated exchanges. FinCEN's rules apply to both domestic and foreign-located MSBs doing substantial business in the U.S.
    *   **IRS (Internal Revenue Service):** Considers virtual currencies as property for federal tax purposes. USVI residents, like other U.S. persons, are generally required to report transactions involving digital assets and pay taxes on any capital gains realized from selling, exchanging, or disposing of cryptocurrencies. Ordinary income tax rates apply to mined crypto or crypto received as payment.
    *   **SEC (Securities and Exchange Commission):** Regulates cryptocurrencies deemed to be securities. Offerings and platforms dealing in such assets must comply with U.S. securities laws, impacting investor protection.
    *   **CFTC (Commodity Futures Trading Commission):** Regulates cryptocurrencies classified as commodities (like Bitcoin) and their derivatives.

*   **Local USVI Regulatory Landscape:** The USVI's Division of Banking, Insurance and Financial Regulation, under the Office of the Lieutenant Governor, oversees financial activities within the territory.
    *   **Bulletin 2022-01:** In 2022, the Division issued a bulletin clarifying its stance on *businesses* seeking to offer cryptocurrency services *within* the USVI. It stated that the existing Virgin Islands Uniform Money Services Act does *not* provide the framework to license or regulate cryptocurrency services specifically. The bulletin determined that cryptocurrency is a "non-licensed product in the Territory," is "not specifically authorized under Title 9, Virgin Islands Code," and is "not regulated by the Banking Board and the Division." Crucially, it stated the Banking Board would *not* approve money transmission applications for entities performing *only* cryptocurrency services.
    *   **Impact on Retail Trading:** This bulletin primarily addresses the *licensing of businesses* operating within the USVI, not the *legality of individuals* trading crypto. While it highlights a lack of specific local authorization and regulation for crypto *businesses*, it does not explicitly prohibit residents from using federally regulated or offshore platforms to buy, sell, or hold cryptocurrencies. The practical effect is that dedicated crypto exchanges may face hurdles setting up physical operations or specific licensing *within* the USVI under current local law, but residents remain subject to, and can generally utilize services compliant with, overarching U.S. federal regulations (like AML/KYC and taxation).
    *   **Taxation:** While the USVI hasn't established its own specific crypto tax framework, USVI residents are subject to U.S. federal tax laws administered by the IRS, which treats crypto as property.

*   **Conclusion:** Individual residents of the USVI are allowed to engage in retail cryptocurrency trading. However, the activity is regulated, primarily through U.S. federal laws governing financial transactions (AML/KYC via FinCEN) and taxation (IRS). Platforms serving these residents must comply with these federal rules. Locally, the USVI government has indicated that cryptocurrency services are not currently licensed or regulated under its existing money services framework, affecting businesses wishing to operate *from* the territory, but not explicitly banning individual participation through compliant external platforms.

**3. Specific Relevant Text Excerpts:**

*   **From USVI Division of Banking, Insurance and Financial Regulation (Bulletin 2022-01):**
    *   "At present, the Virgin Islands Uniform Money Services Act as prescribed does not provide the regulatory framework needed to license and regulate the business of cryptocurrency services. Specifically, the Virgin Islands has no laws, rules and regulations governing cryptocurrency services; and the licensure and regulation of cryptocurrency services do not fall under the existing money transmission provisions of the Uniform Money Services Act."
    *   "As such, the Banking Board has determined the following, cryptocurrency is: (1) a non-licensed product in the Territory, (2) not specifically authorized under Title 9, Virgin Islands Code to be used in the United States Virgin Islands and (3) not regulated by the Banking Board and the Division."
    *   "To that end, the Banking Board will not approve or consider any money transmission application for licensure, wherein the entity performs cryptocurrency services only."

*   **From FinCEN (Advisory FIN-2019-A003):**
    *   "Many business models of entities dealing with CVC [convertible virtual currencies] operate as money transmitters. As money transmitters, persons accepting and transmitting CVC are required, like any money transmitter, to register with FinCEN as MSBs and comply with anti-money laundering/countering the financing of terrorism (AML/CFT) program, recordkeeping, and reporting requirements. These requirements apply equally to domestic and foreign-located CVC money transmitters doing business in whole or substantial part within the United States, even if the foreign-located entity has no physical presence in the United States."

*   **From IRS (Digital Assets Page):**
    *   "For U.S. tax purposes, digital assets are considered property, not currency."
    *   "You may have to report transactions with digital assets such as cryptocurrency and non fungible tokens (NFTs) on your tax return. Income from digital assets is taxable."
    *   A question regarding digital asset transactions appears on Form 1040 (Individual Income Tax Return) and Form 1040-NR (U.S. Nonresident Alien Income Tax Return), applicable to relevant USVI residents.

*   **From Faisal Khan (Analysis of US Crypto Regulations):**
    *   "Each of the 50 states, Washington D.C., and U.S. territories—such as Guam, Puerto Rico, and the U.S. Virgin Islands—has its own set of laws governing money services businesses (MSBs), virtual currencies, and crypto assets... At the federal level, MSBs and virtual currency service providers must adhere to regulations enforced by agencies like the Financial Crimes Enforcement Network (FinCEN)..."

**4. Source URLs:**

*   **USVI Division of Banking, Insurance and Financial Regulation - Bulletin 2022-01:** `https://ltg.gov.vi/wp-content/uploads/2022/03/Bulletin-2022-01-Licensure-and-Regulation-of-Cryptocurrency-Services-in-the-USVI.pdf` (Link derived from search result [2])
*   **FinCEN - Advisory on Illicit Activity Involving Convertible Virtual Currency (FIN-2019-A003):** `https://www.fincen.gov/resources/advisories/fincen-advisory-fin-2019-a003` (Referenced in search result [12])
*   **IRS - Digital Assets Information:** `https://www.irs.gov/businesses/small-businesses-self-employed/digital-assets` (Referenced in search result [18])
*   **Faisal Khan - Understanding US Cryptocurrency Regulations in 2025:** `https://faisalkhan.com/blog/us-cryptocurrency-regulations/` (Referenced in search result [9])
*   **Conference of State Bank Supervisors (CSBS - includes USVI):** `https://www.csbs.org/` (General reference for state/territory coordination, mentioned in [3] and [10])

---
**Disclaimer:** Cryptocurrency regulations are rapidly evolving. This report reflects the status based on available information as of April 12, 2025. Individuals should consult with qualified legal or financial professionals for advice specific to their situation.