Banking Crackdown Dominates Day One of Isle of Man Bitcoin Conference
Just one day before the conference of more than 200 attendees began, a firm providing banking facilities to bitcoin businesses on the island announced it would close those accounts under pressure from its partner banks.
Still, the event was opened resiliently by the Isle of Man’s Lieutenant Governor, Adam Wood, who extolled the island’s ability to take advantage of a rising interest in digital currencies.
“The rapid development of digital currencies is leaving legislators and regulators playing catch-up. This is where the Isle of Man’s small size works to its advantage. It’s agile and we can make an appropriate response in record time.”
A panel on banking garnered the most attention, as R Paul Davis, the most visible digital currency proponent on the island, decried the banks’ decision to cut ties with domestic bitcoin businesses.
Davis addressed the crowd and this most recent news head on, saying:
“HSBC closed CTS’ corporate accounts because it objected to bitcoin transactions flowing through it.”
Davis went on to state that banks like Barclays were invited to speak at the event, but demurred following “national discussions”. Davis also announced that a merchant services firm based in the US called Instabill would pick up the slack from CTS’ account closures.
“[Instabill] would be able to fairly quickly replace everything CTS is offering with the exception of UK Faster Payments. I have warned [Instabill’s CEO] that his only real danger is being killed in the rush.”
Davis also offered his predictions on which banks would recognise the opportunity in digital currencies, and which would fall behind, asserting that Spanish megabank Santander would be first to capitalise on cryptocurrency given its exposure to Latin American markets where remittances and online payments are in demand.
He said banks like HSBC and Barclays, which have faced recent sanctions from regulators, would be last.
The regulatory panel, which included David Hodgson, deputy director for authorisations at the island’s financial regulator, the Financial Supervision Commission, was largely positive on the development of digital currencies on the island.
“My view is that where the Isle of Man government has decided to place itself, bringing in the AML [anti-money laundering] regulations is appropriate,” Hodgson said, referring to the island’s requirement that digital currency firms have to register with the FSC for AML oversight.
John Spellman, the island’s director of financial services, likened digital currencies at present to earlier payment systems, which met with initial resistance before widespread adoption.
Drawing comparison to debit cards, Spellman said:
“The idea of validating yourself with a PIN was bizarre. I see digital currencies as being in the same place.”
Gaming and crowdfunding
Simon Dixon, of Bank to the Future, talked up the Isle of Man’s potential to become a prime location for bitcoin firms on a panel he shared with Max Keiser, host of the television programmeThe Keiser Report.
Dixon threw jabs at London and rival offshore jurisdiction Jersey:
“This is the ideal jurisdiction to disrupt the [banking] market. The jurisdiction that will win is not London [… and] despite the fact that Jersey reactionarily came along after the Isle of Man, it is a banking island, I think there will be a lot of politics involved with a new form of finance.”
The Isle of Man has a large online gambling industry, comprising about 10% of its gross domestic product. Firms like online poker giant Pokerstars are based on the island.
Panellists on the session on gaming and cryptocurrencies welcomed the greater adoption of digital currency globally, with one panellist noting that cryptocurrencies could potentially offer greater profit margins to gaming operators.
On the sidelines, investor Brock Pierce, who is a co-founder of Isle of Man-based GoCoin, was effusive in his praise for the event.
Pierce’s remarks captured the optimism of the event:
“It’s so refreshing hearing from government officials and regulators who are positive about digital currencies. The Isle of Man is the centre of the bitcoin universe now.”
Featured image of Isle of Man Lieutenant Governor Adam Wood via Crypto Valley Summit
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The Isle of Man is home to a growing number of businesses that accept Bitcoin. During the past decade, the island became an important outpost to online poker, and some of the world’s biggest companies have relocated to the island, including Rational Group, the owner of websites like PokerStars and Full Tilt Poker.
Throughout the years, many outsiders settled on the Island. These people were young programmers and tech-savvy professionals from the U.S., Canada, and Brazil looking for jobs in the online gambling industry. These formed the core of entrepreneurs who would later introduce Bitcoin to the island.
The island has a history with embracing emerging technological innovations, such as satellites and cellular service. The protectorate always had a very friendly approach to new technologies, and digital currency businesses saw Manx as the perfect acting ground. Now, the Isle of Man is already considered to be a haven for Bitcoin businesses.
The government is seeking to make the island one of the most important hubs for Bitcoin. There are currently about 25 startups working with digital currencies or theblockchain technology, and that number is growing steadily.
The Manx government’s approach to bitcoin was parallel to its formerly usual approach with other technologies. In less than a year, the government was able to create a regulatory framework and passed legal changes through the Isle of Man’s parliament.
Nick Williamson, an American entrepreneur who decided to settle in the Isle, launched a startup calledPythia. The startup provides off-the-shelf software that allows customers to develop and run their own customized blockchains. To further develop and test his product, he signed a partnership with the Isle of Man government to help establish a new register of the island’s cryptocurrency companies. As a pilot project, that register itself will be stored on a blockchain created using Pythia’s protocol. This will make the Isle of Man the first government in the world to use a blockchain to store official data.
In fact, there are some similarities in the way the government tried to design the regulatory regime for online gaming a decade ago, which helped legitimize the entire sector. What’s happening today with bitcoin has a big resemblance to what happened with e-gaming regulations and will help cement confidence over digital currencies.
On the other hand, the Isle of Man’s openness towards digital currencies comes at a time when Manx is under a heavy scrutiny from the U.K. for its status as an offshore tax haven, which in turn may come as a negative downside to the currently used regulatory frame.
The Island of Man is seeking to diversify further its economy, especially its e-commerce sector, including online gaming, which already accounts for more than 20% of the Isle of Man’s annual gross domestic product. The Isle government hopes that digital currency may come to a new industry that will eventually account for a big part of the protectorate domestic income.
What do you think about the regulatory approach used by the Isle of Man government? Let us know in the comment section below!
Originally posted on: Isle of Man: a Safe Haven for Digital Currency