Key Takeaways
- The legislation defines crypto as a commodity rather than a security and excludes payment tokens from being considered investment contracts.
- The regulator will also supervise digital banks and cross-border payment operations.
The Republic of Nauru has enacted a new law establishing the Command Ridge Virtual Asset Authority (CRVAA), making it the first Pacific Island nation to launch an autonomous regulator focused on virtual assets, digital banking, and Web3 activities.
The law, passed by Nauru’s Parliament and announced by the government on Tuesday, tasks the CRVAA with overseeing a licensing framework for crypto firms seeking to register and operate using Nauru as a legal base. The legislation defines crypto as a commodity rather than a security and excludes payment tokens from being considered investment contracts.
Under the new regulatory regime, a wide range of activities will fall under the CRVAA’s oversight, including crypto exchanges, non-fungible token platforms, initial coin offerings, decentralized finance services, lending, staking, yield farming, and stablecoin issuance. The regulator will also supervise digital banks and cross-border payment operations.
The CRVAA is mandated to enforce cybersecurity protocols, monitor financial transactions, and ensure compliance with anti-money laundering and international financial transparency standards.
Nauru President David Adeang stated that the regulation was intended to help the country diversify its revenue sources and reduce reliance on external climate finance. The President referenced Nauru’s inclusion in the United Nations Multidimensional Vulnerability Index and cited economic and environmental risks as motivating factors for adopting the legislation.
“This step aims to harness the potential of virtual assets to diversify revenue streams and fortify economic resilience,” Adeang said.
The government confirmed that the new framework is intended to allow virtual asset service providers to establish themselves in Nauru and legally offer services within and potentially beyond the country. Licensing will be a requirement for all covered activities.
Minister for Commerce and Foreign Investment Maverick Eoe told Parliament that the bill is structured to align Nauru with jurisdictions seeking to become competitive in the digital asset sector. He stated that the legislation will position Nauru alongside countries that have developed legal infrastructure for blockchain and decentralized finance operations.
“This Bill proposes to introduce a framework that will put Nauru on par with other countries leading in the development of their digital economies and generating revenue from such developments,” Eoe said.
According to the government, the CRVAA will operate independently and report directly to relevant government offices. The new framework is also intended to support contributions to Nauru’s Intergenerational Trust Fund and other financial instruments.
