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Hawk-i - 05 October 2018

Paving the way for a Cryptocurrency future

Cryptocurrencies have surged in value in recent years. Corporate Services Director, David Carswell, explains why Jersey is paving the way when it comes to creating some structure around this new and exciting currency.

Author of article:

David Carswell

Client Director, Corporate Services

The value of Bitcoin rose more than 1000% in 2017. And within the first half of 2018, blockchain start-ups raised over $12billion through Initial Coin Offerings (ICOs), which is almost four times that raised during 2017. With the growth of cryptocurrencies, investors are increasingly looking for exposure in this space.   

However, investing and trading in cryptocurrencies does come with risks and regulatory considerations. Cryptocurrency exchanges have often been perceived as risky due to, amongst other things, the danger of hacks and the often unregulated nature of trading on these exchanges. As a result there has been a drive to bring regulated financial products into this market.

Thanks to the proactive and agile approach adopted by the Jersey Financial Services Commission (JFSC) and the finance industry in Jersey as a whole, Jersey has evolved from being the jurisdiction that launched the first regulated cryptocurrency investment fund in 2014, to fast becoming a preferred jurisdiction in the cryptocurrency arena.  Notably this year, Digital Jersey signed a Memorandum of Understanding with Binance, the world’s largest cryptocurrency exchange, for the exchange to further expand its global business here.    

The guidance notes from the JFSC and briefing notes from the Island’s various service providers make the message clear; Jersey is committed to innovation and fintech and welcomes the introduction of high quality businesses looking to establish themselves in the digital asset industry on the Island.

Generally, Jersey is recognised as an ideal jurisdiction for a number of reasons, including:

  • Expertise in the sector
  • Central time zone
  • Internationally respected regulatory framework
  • Tax neutrality (provided certain criteria are met)
  • Large network of qualified professionals
  • Leading and long established financial centre

In addition and in relation to establishing an ICO or digital asset vehicle, Jersey has a developed fintech and digital infrastructure and the comfort that comes with dealing with a supportive regulator.  Issuers and investors alike can be confident with Jersey as a forward thinking and coordinated jurisdiction for cryptocurrency. 

The JFSC’s most recent guidance note in July 2018 sets out the application process for issuers of ICOs.  Whilst most ICOs are unlikely to be regulated by the JFSC, for a consent to be issued by the the Registry, the ICO issuing vehicle will be required to, amongst other things:

  • Appoint a Jersey resident director
  • Appoint a Jersey licensed administrator
  • Appoint an auditor
  • Adopt relevant AML/CFT policies and procedures
  • Submit an Information Memorandum

The full list of the set-up and ongoing requirements can be found in the JFSC guidance note.

It is clear that the general move within many sectors towards automated processes, digitalisation, innovation and AI is unlikely to slow down any time soon.  Finance is no exception to this.  More and more jurisdictions are showing a proactive approach to ensuring that their regulations and policies can accommodate cryptocurrencies.  Hawksford is one of the first companies in our sector to have developed a multi-jurisdictional and holistic offering for the Crypto industry.

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