Isle of Man Outlines Plans for Digital Currency Regulation

The Isle of Man's Department of Economic Development is set to introduce controls on digital currencies such as bitcoin.

Designed to protect businesses and customers using digital currencies, the controls will also provide an environment that enables companies operating within the space to flourish.

Peter Greenhill, the department’s director of E-Business Development, said: "The Isle of Man recognises both the risks and opportunities presented by digital and virtual currencies."

He added:

"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."

Greenhill said the Isle of Man's Financial Supervision Commission (FSC), the Department of Home Affairs and the industry will work together to ensure a fair policy is developed and implemented.

He went on to say the Isle of Man recognises that the digital currency market will "develop and change rapidly," so any rules created will be kept under review and updated as and when it is appropriate.

The government is keen to state that it is not creating specific regulation for digital currencies, instead, it is intending to include them under the Proceeds of Crime Act 2008 and the Designated Business (Registration and Oversight) Bill 2014.

Excellent news

R Paul Davis, group general counsel for Counting House Services, labelled the move "excellent" news. According to Davis, the Isle of Man is saying "welcome" to bitcoin businesses, providing they are compliant and operate to best standards.

"They cannot come here to launder money, defraud the public, or damage the island’s reputation. But they can pitch their tent here, do their business, build their software and offer their services," he added.

Davis said the most important factor to note is that currency businesses will be able to register with the FSC, adding:

"The Isle of Man has stopped short of establishing a bespoke regulatory regime, because that needs more time. But banks, service providers, landlords and technology companies on the island can all be confident that digital currency development has full government support and the FSC is not going to penalize anyone for engaging in the sector."

He highlighted that government grants and incentives will also be available to digital developers and entrepreneurs who want to call the island home.

Previous ruling

Back in March, Davis received a ruling from the island’s Financial Supervision Commission stating that bitcoin exchanges do not require licences to operate within the Isle of Man.

However, the ruling stated that the situation could change:

"[...] it is possible that legislation could be amended in the future to bring the proposed activities within regulated activity and/or to make the activity subject to the AML Code and thus subject to the draft Designated Businesses (Registration and Oversight) Bill 2014."

The Isle of Man is known for having a favourable tax regime, with residents being taxed at 20% on incomes up to £120,000 per year, businesses paying no corporate tax and banks only 10%.

Charlie Woolnough, chairman of the Manx Digital Currency Association, said these favourable limits, plus the government's new announcement, all help in the island's move towards becoming the domicile of choice for digital currency companies.

The Isle of Man government has explained its new stance on digital currencies clearly in a question and answer document.

Isle of Man image via Shutterstock.