Regulator Norms Getting Stricter for Crypto Industry Scrutinizes Real PresenceNovember 15, 2018
New changes have been introduced with respect to the registration of cryptocurrency exchanges and related platforms. These changes have been proposed by the financial regulator of Isle of Man.
The Isle of Man along with the UK falls within the EU area. The Isle is a crown dependency. Of note, the territory is self-governing. These rules also cover for projects that conduct ICOs.
Companies who are operating cryptocurrencies will file their registration per the Designated Business Act, 2015.
The policy requires the companies to have a minimum of 2 directors. These 2 directors need to be the residents in the Island. Apart from that, the registered companies need to be managed and controlled from the Isle of Man.
The updated rules from the Islands regulator are meant to improve monitoring of the activities happening in the cryptocurrency based industries.
The Isle of Man Financial Services Authority (IOMFSA) has proposed these regulations due to the increased risk of those companies that are managed outside its jurisdiction. Those companies who operate via external jurisdiction pose a very high risk that is not acceptable. The risk of money laundering and a range of other illegal activities are more with crypto companies which are located in a jurisdiction outside of the Island.
Real presence in the island is very important to be able to scrutinize the businesses processes. Therefore, IOMFSA is stressing on the importance of real presence in the Island. It is only when the companies have a presence in the Island, the IOMFSA will be able to exert its statutory duty over the activities of these companies.
Due importance is provided for designated businesses with respect to the AMT/CFT legislation. Oversight is important to monitor the intricate activities of the business, and the regulatory body will be enabled only when these companies come under its jurisdiction.
The registration policy is focussed on issuing digital tokens. The regulator requires that the companies who are operating cryptocurrency business should provide their users with some other benefit other than the token. The authority is requiring asset back up for the value of the investment for its investors.
The regulatory body has not yet provided a clear definition for the term benefit. There has been no information provided so far about how the token should be received by the buyer.
Of note, the Isle of man is a crypto friendly destination. The crypto friendly legal framework is being implemented in several European jurisdictions. Permissive regulations still favor ICOs by companies. It is all about getting registered. The Island is pretty positive about the cryptocurrency and the blockchain business. They are trying to regulate the potential of the business in a way to save it from exploiters.