Isle of Man Looks to Make Room for Digital Currencies in Legal Framework
The Isle of Man, announced plans Tuesday for developing a framework for the regulation of digital currencies on the island.
The Isle of Man, a tax haven and small British crown dependency in the middle of the Irish Sea, announced plans Tuesday for developing a framework for the regulation of digital currencies on the island. This would classify digital currencies as property and appropriate anti-money laundering controls to local businesses that dealt in such currencies.
“The government has instructed the relevant departments and statutory bodies to ensure there is a regime that promotes both business opportunities but also applies appropriate anti-money laundering requirements,” said Peter Greenhill, director of e-business development in the Manx Department of Economic Development.”
“Our stance is intended to welcome those who can meet the necessary standards while also preserving the island’s good reputation as a financial centre.”
At the moment, the Isle of Man’s Department of Economic Development is only beginning to develop this framework, in coordination with the Financial Supervision Commission, the Department of Home Affairs and the industry sector.
“We are looking to recognise digital currencies as a property, rather than a currency, and apply the appropriate anti-money laundering controls that one would expect of a responsible jurisdiction,” reads a department FAQ sheet accompanying the announcement. “To ignore the problem of such potential criminal activity is to be negligent of the risks.”
The Isle of Man
A potential framework for regulation of Bitcoin on the island is big news specifically because they are now outside the jurisdictions of certain laws.
Martin Katz from Middleton Katz Chartered Securities LLC explained in a blog post earlier this week how that works and why Bitcoin exchanges are unregulated there:
“The Island’s Financial Regulator of the Financial Supervision Commission recently confirmed that an Isle of Man entity acting as a Bitcoin exchange where the payment processor was located outside the Island fell outside the current regulation. ..."
“Presumably, from the point of view of Class 8 [Katz notes earlier: ‘Acting as a currency exchange is specified in Schedule 1 of the Regulated Activities Order 2011 as a licensable activity under Class 8’], regulation doesn’t apply because bitcoins are not considered money / currency and in respect of Class 2 they fall outside the current definition of an Investment.”
In a country already without capital gains tax, wealth tax, stamp duty, or inheritance tax, and with a top rate of income tax of 20%, this has been the cherry on top for Bitcoin exchanges and some Bitcoin businesses.
“I think this would be a good thing because a level a regulation would add credibility and trust which would increase consumer confidence and drive business here so the sooner regulations are introduced the better,” Katz wrote.
