The Isle of Man (IoM) government says it’s making good legislative headway on the regulation of cryptocurrencies, as it seeks to position itself as a prime location for firms dealing in digital money.
The island is already home to a thriving e-business sector, with its competitive tax regime and supportive legislative environment proving a draw for firms in the online gambling, aviation, financial services and green technology markets.
The income generated by these firms has been re-invested in the island’s infrastructure to make it as resilient as possible, with the government claiming its “self-healing ring” setup means there are no single points of failure for its network connections or power supply.
The Isle of Man has made a concerted effort over the past year to attract cryptocurrency startups and drive up the contribution e-business makes to its economy from 20% now to at least 23% by 2020.
This has seen the IoM government take steps to adapt existing legislation, introduce new bills and create codes of conduct for cryptocurrency companies that must be adhered to if they want to operate on the island.
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- The use of virtual currencies is maturing, and responses to their use are rapidly evolving. Virtual currencies are a paradigm-busting phenomenon that test the existing frameworks of central banking, taxation and currency.
- The government has released a Call for Information to invite views on the benefits and risks of digital currencies. It hopes to learn more about the new currencies available to manage the future developments of payments.
For example, the government’s revamped Proceeds of Crime Act, which has been altered to account for digital currencies, is expected to come into force at the start of April.
It’s also introducing a second piece of legislation – dubbed the Designated Businesses Bill – that seeks to regulate the activities of businesses responsible for holding sums of money. These include estate agents, accountants, law firms and – now – Bitcoin exchanges.
These companies will be listed on a register that will be strictly controlled by the island’s Financial Supervision Commission, said Peter Greenhill, director of e-business at the IoM government.
“They will hold their records, have them audited, looked at, and if they see something untoward they’ll take those people off that register and make sure the world knows about it,” he said.
This might sound like a tough line to take for companies the government wants to attract to the island, but Greenhill said it’s a necessary step to foster trust in the use of cryptocurrencies.
Despite high-profile declarations from the likes of hardware giant Dell about its willingness to accept Bitcoin payments, digital currencies are still viewed with a degree of caution by the public at large.
Our aim is to protect individual users and keep crime out of the Isle of Man. We set the bar high, and if people don’t meet our requirements, they can go somewhere else
Peter Greenhill, IoM government
But Greenhill pointed out it’s not the virtual currencies themselves that are the problem, but the antics of the firms responsible for running the exchanges.
“Our aim is to protect the individual [users] and keep crime out of the island, and we seem to have been ahead of everyone else in addressing that,” he said. “We set the bar high, and if people don’t meet [our requirements], they can go somewhere else.”
The legislative landscape
The speed at which the IoM has been able to introduce legislative changes is partly down to the way the island is self-governed, with Greenhill suggesting it’s taken around a year to push things through.
“If you recognise something needs to be done, you can move smoothly to get the legislation right, but we can run it at a pace that is right for industry, rather than – with all due respect – get hit by party politics and everything that goes with that,” he explained.
The Isle of Man embarked on a similar legislative approach when it set out to attract online gaming firms over a decade ago, said Greenhill, and he’s hopeful it will serve them well again.
“If we go back 12 years, when e-gaming started, the island recognised there was a market that needed support and some legislation. If you look today where we are with that, [we have some of] the world’s biggest operators and tech suppliers setting up their headquarters and systems here,” he said.