Why aren’t Bitcoin exchanges regulated in the Isle of Man ?

Bitcoin in a hand

There has been a lot of talk in the press about the Isle of Man and the fact that there is no regulation of bitcoin exchanges here in the Isle of Man. In this short article I try to explain what it’s all about and why our financial services regulations don’t apply to such exchanges.

The article assumes you already know about Bitcoin business – if you don’t and you are interested take a look at the FAQ here.

Financial Services in the Isle of Man are governed by the Financial Services Act 2008. Acting as a currency exchange is specified in schedule 1 of the Regulated Activities Order 2011 as a licensable activity under class 8 and “Arranging deals in investments” is licensable under Class 2 as Investment business.

However 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. I have not seen the detail of the letter which the FSC wrote in response to R Paul Davis’s legal opinion but I did take a look at the legislation.

Presumably, from the point of view of 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 (see schedule 2 of the regulated activities order).

The Isle of Man Government claims to be broadly supportive of Bitcoin related business initiatives; and it is a virtual certainty that the Regulations will be amended to regulate Bitcoin business soon. It seems slightly counter-intuitive but 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.

Another development that may interest you is the establishment of the Manx Digital Currency Association..

If you are active in this space and need help setting up operations in the Isle of Man; feel free to drop me a line and we’ll do our best to assist you.

photo credit: CoinDesk via photopin

0 Comments

Leave a reply

Your email address will not be published. Required fields are marked *

*

©2017 Middleton Katz Chartered Secretaries LLC is licensed by the Isle of Man Financial Services Authority

Log in with your credentials

Forgot your details?