Useful information for wannabe Isle of Man Bitcoin Professionals

Bitcoin picture

There continues to be a high level of interest on the Isle of Man concerning the possibility of setting up Bitcoin related (specifically exchanges) here.
Of course I don’t wish to stop the party but this article highlights an important issue relevant to those (like me) who are interested in helping to set up Bitcoin exchanges on the Island.
First a recap.
In March 2014 – R Paul Davis asked the Isle of Man Regulator (the Financial Supervision Commission) to confirm that Bitcoin Exchanges were not regulated in the Isle of Man; which they duly did. For a full explanation of why they are not regulated see my blog article here.
Subsequently, interested parties on the Island set up the Manx Digital Currency Association and enquiries began to flood in to Island businesses.
On the 10th June 2014, the Isle of Man Government issued an announcement regarding digital currencies; it covered a range of points but specifically announced that Bitcoin Exchanges would (effectively) be regulated businesses as they will be subject to the Proceeds of Crime Act 2008 and the Designated Business (Registration and Oversight) Bill 2013.
For more information see my blog article “A Practical Guide to..How the Isle of Man plans to ‘control’ bitcoin exchanges.”
More recently the momentum has continued – our competitors in the Channel Islands have got in on the act. As usual, they are following behind us in the Isle of Man (lol) but it has to be said that Jersey has generated some useful publicity right across the media by billing themselves as ‘Bitcon Isle’ – how the media just loves some spin 🙂
OK so what’s the Problem ?
The USA has elected to regulate Bitcoin exchanges using a similar mechanism to the Isle of Man; that is to say, they have included this type of business within existing anti-money laundering legislation by deeming Bitcoin exchanges and cryptocurrency exchanges as“Money Transmitters” or “Money Services Businesses” which are already subject to controls at both a Federal and State level. The relevant guidance was issued on 18 March 2013 as FIN 2013-G001.
In practice, this means that Bitcoin exchanges in the States are regulated by FINCEN; the requirements for registration are comprehensive but appear workable; You can find details on David Anderson’s blog article entitled “Are cyptocurrency exchanges regulated” additionally, 48 of the 50 States also regulate the activity at the State level meaning that additional registration could be required for each State where an Exchange has a customer.
At this point; it’s tempting for those of us offshore to exchange smug glances while thinking “but of course that doesn’t apply to us as we are outside the States and subject to our own laws”
Not so fast I’m afraid…
On  February 2012 FINCEN made it clear (see FIN-20120A001) that overseas Money Services Business which do business ‘in substantial part’ within the USA are subject to the same US regulation as a domestic businesses and are required to comply fully with US rules including the requirement to appoint a local agent for service. Non compliance, of course, is a criminal offence.
So those of us considering getting involved in Isle of Man Bitcoin exchange business should be very aware of this and plan accordingly; alternatively you may end up sitting rather nervously on the plane as you contemplate negotiating the US border control on the way to your family holiday in Florida.
photo credit: zcopley via photopin cc


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