Behind the News – Bitcoin and The Isle of Man
Isle of Man and Bitcoin
Also, the Isle of Man announced its plan for digital currency regulation. This was received with excitement by sections of the Bitcoin community.
The Isle of Man is a self-governing British crown dependency in the Irish Sea. It is a well known jurisdiction for its favourable tax regime.
The jurisdiction is now looking to recognise digital currencies as property, rather than currency.
According to a position paper, the local authorities have received many enquiries from digital currency businesses wanting to operate in a controlled manner in a well-respected jurisdiction. Also, less well-funded start-ups are looking for a base of operations.
The absence of regulation in the Isle of Man creates a situation where business could trade from the jurisdiction yet engage in practices against the Island’s stance on anti-money laundering. The Isle of Man’s authorities want to avoid this situation.
What is most encouraging is the Isle of Man’s pragmatism and forethought. Recognising that the pace of innovation is rapid, they fully concede that
a full regulatory regime should be avoided. At this time it would be costly and out of date before the rules are enacted.
Further, international standards or restrictions may be introduced as the market develops. They have decided instead to consider a anti-money laundering regime which can be implemented in a timely manner and protects the Isle of Man’s reputation.
To that end digital currencies like Bitcoin will be classified under the Proceeds of Crime Act 2008 and the Designated Business (Registration and Oversight) Bill 2014. This will ensure that the activities undertaken are subject to the anti-money laundering legislation.
Ultimately this means that a business will need to register with the Financial Supervision Commission. They will also need to submit to appropriate reviews, ensuring AML compliance is being managed properly and run by appropriately skilled staff.
As far as implementation is concerned, going forward, there will be two stages. Firstly, inclusion of digital currency activity in Schedule 4 of the Proceeds of Crime Act 2008, set for later in 2014. Businesses will need to comply with the Anti-Money Laundering Code. Secondly, the inclusion of digital currency activity in the Designated Business (Registration and Oversight) Bill 2014.
It is expected that this Bill will be enacted during the first half of 2015. Once enacted digital currency businesses will be required to register with the Financial Supervision Commission. The FSC will become responsible for oversight of their anti-money laundering compliance.
Clearly the Isle of Man recognises the rapid innovation occurring in the Financial Services industry, particularly around virtual currencies. The jurisdiction seems keen to welcome legitimate Digital Currency businesses, while ensuring to respect AML protocols and standards. Businesses in this space will bring jobs and income to the Island and create enhanced career opportunities.