The Isle of Man
A world leader in bitcoin
Initial Coin Offering (ICO)
Cryptocurrency on the Isle of Man
No other government on the planet has welcomed digital currencies as warmly as the Isle of Man. The tiny island off the north-west coast of England has become a world leader in bitcoin related industries. The government there will be the first to use the block-chain to store a register of the islands cryptocurrency companies.
Isle of Man Bitcoin Legislation
Financial Services Act 2015
Changes have been made to the regulatory landscape on the Isle of Man in relation to digital currency businesses. On the 26 October 2015 the Isle of Man Government passed the Designated Businesses (Registration and Oversight) Act 2015 which brought digital and crypto currency businesses under regulation.
With the launch of the act the Isle of Man Government has introduced a registration process whereby any new companies operating in this space are required to register their business with the Isle of Man Financial Services Authority and comply with Anti-Money Laundering and Countering Terrorist Financing legislation (AML/CFT) and the Proceeds of Crime Act 2008. The registration process opened on the 9 November 2015 for all new companies.
Isle of Man Introduces Regulation for
Digital currency businesses will have to comply with the Isle of Man’s anti-money laundering (AML) laws from 1st April 2015 and will likely fall under the remit of the Financial Services Commission.
The Isle of Man government has amended the Proceeds of Crime Act 2008, so it covers bitcoin companies, such as exchanges, operating from the island.
Amendments to the act have been approved and state the following businesses will have to adhere to AML requirements:
“Those in the business of issuing, transmitting, transferring, providing safe custody or storage of, administering, managing, lending, buying, selling, exchanging or otherwise trading or intermediating convertible virtual currencies, including crypto-currencies or similar concepts where the concept is accepted by persons as a means of payment for goods or services, a unit of account, a store of value or a commodity.”
These companies will have to report to the authorities if they suspect a person using their business is engaged in money laundering. They will also have to assist in identifying the person they believe is involved.
This means cryptocurrency businesses will have to adopt certain know-your-customer (KYC) practices, collecting ID information so this can be passed on to the authorities if they suspect money-laundering activity.
Amendments are also set to be made to the soon-to-be-introduced Designated Businesses (Registration and Oversight) Bill 2014, requiring the businesses mentioned above to register and be overseen by the Isle of Man Financial Services Authority (FSA), which has become the supervisory authority for AML matters.
How long will an application take?
Once received the application will be processed in accordance with the Authority’s Licensing Procedure. The Authority’s current published service standard for processing an application, from receipt of the application form to a hearing by the Board, is 3 months. This standard applies to an application with which there are no major difficulties concerning the applicant or people connected with the applicant.
An application may take considerably longer than 3 months to process if it is incomplete or if there are issues in relation to the applicant or any of its key persons that require further investigation before a recommendation can be made to the Board of the Authority. To ensure your application is processed as quickly as possible, it is important that you arrange for all the necessary forms and documentation to be completed as accurately as possible and submitted in a timely manner.
During the processing of your application, two-way communication with the Authorisations Division is essential. This dialogue will allow the Authorisations Division to gain a better understanding of the business, which may also speed up the application process.
Initial Coin Offering (ICO)
International Coin Offerings (“ICOs”) are increasingly popular among start-up and other companies when raising capital. Investors participate in the fundraising by transferring fiat currencies or cryptocurrencies to the issuer in exchange for digital tokens (“Tokens”), representing a holder’s right of benefit or performance vis-à-vis the issuer. Tokens may also be used (exclusively) for payment to the issuing company for its services or products. Contrary to shares offered in a traditional initial public offering (“IPO”), Tokens typically do not represent ownership interests or dividend rights. ICO investors seek to directly benefit from the issuing company’s future business, while investors in IPOs tend to pursue a long-term interest in the value-creation of the IPO entity.
The underlying technology of the Tokens is based on blockchain which is maintained by a network of participants and computers. Utilizing cryptography to record transactions, blockchains process, verify and track the trade of the relevant virtual currency securely across independent network components.
Similarly to IPOs, the issuer can use the proceeds of the ICO to finance its business operations and future growth. In the event that Tokens are exchanged for other cryptocurrencies, the issuing company can exchange them for fiat currencies. As the features of Tokens issued in ICOs can vary widely, every Token has to be assessed individually. Tokens are typically tradable on virtual currency exchanges, creating a secondary Token market, which makes them fungible in the same way as shares.
Financial Regulation of ICO’s
ICOs are an innovative and appealing method for companies to raise capital. Although there is currently no specific ICO regulation in place, a diligent analysis of the regulatory framework is necessary to identify and ensure legal compliance with all applicable laws and regulations prior to launching an ICO.
Legal challenges arise especially if an ICO targets investors globally. Regardless of the Token structure, the issuing company needs to provide investors with sufficient and accurate information and disclose such information comprehensively and transparently to permit average investors to make a reasonable investment decision.
How TBA can Help You
Should you wish to register or consider the Isle of Man as the jurisdiction where to be registered for your Digital Currency Business, our Business Development Team will be ready and available to guide you all you’re your analysis and decision process.
Our experts will provide you all relevant information about the Isle of Man Advantages and Pricing, inclusive guidance on Initial Coin Offering (ICO) registration in the IOM, should you need.