Regulators in the Isle of Man have tightened the rules around registering cryptocurrency businesses in the jurisdiction, imposing two new conditions on those seeking to register.
In a revision to the Designated Businesses Act 2015, which established the structure of regulation for registered cryptocurrency businesses in the British Crown Dependency, companies will now be required to have at least two directors resident on the island.
There is also a new requirement for businesses to be managed and controlled from the Isle of Man, in a move that has been seen as shoring up the island’s crypto industries.
According to the Isle of Man Financial Services Authority (Iomfsa), the changes are a necessary step to allow the regulator to undertake effective industry oversight. It noted, “In order for the Iomfsa to be able to successfully undertake its statutory duty of overseeing compliance of designated businesses with the AML/CFT legislation, designated businesses must have sufficient real presence to facilitate oversight.”
The revised rules also impact on initial coin offerings (ICOs), in particular holding that ICOs will only be permitted where they offer a ‘benefit’ beyond the token itself, although the precise legal definition of ‘benefit’ remains unclear.
The update in the law comes at a time of increasing competition between jurisdictions vying to create favourable regulatory regimes for the growing cryptocurrency sector. In particular, the introduction of official legal frameworks is designed to enable large institutional players to become more involved in crypto sectors, which relies on legal certainty and structure.
It follows in the footsteps of jurisdictions like Gibraltar, already a haven for iGaming and financial services, which became the first jurisdiction to introduce a regulatory regime for ICOs.
A number of cryptocurrency companies have set up or moved to Malta on a similar basis, thanks to its structured crypto laws, including Binance and Okex. Similarly, Switzerland and neighbouring Lichtenstein are working with banks and regulators to foster their nascent Crypto Valley in Zug, home to some of Europe’s most fancied crypto startups.
With more companies choosing to set up in the Isle of Man, it remains to be seen whether the tightening of licensing conditions will make the jurisdiction even more appealing to those crypto firms pitching at regulated businesses.
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