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First Regulated Bitcoin Investment Fund to Launch on Island of Jersey

| Published on July 10, 2014 at 12:46 BST

The island of Jersey has approved the launch of a bitcoin investment fund, which the government claims will be the first such fund to be regulated.

Called the Global Advisors Bitcoin Investment Fund (GABI), the fund received regulatory approval from the Jersey Financial Services Commission (JFSC) earlier this week. The fund, set up by Global Advisors Jersey Limited (GAJL), is set to launch on the 1st August.

The Island of Jersey is the largest of the Channel Islands and is a self-governing British Crown dependency. Due to its liberal tax policies the island developed into a tax haven during the 20th century.

As a consequence, the island’s economy is based largely on financial services, although in recent years it has started attracting e-commerce companies and now has a bitcoin advocacy group that is campaigning to turn it into a 'bitcoin isle'.

Business-friendly jurisdiction

The island’s assistant chief minister in charge of financial services, Senator Philip Ozouf, welcomed GABI's regulatory approval and imminent launch, saying Jersey is pleased to be paving the way toward regulated bitcoin funds.

“Fintech, which broadly defines the emerging digital industry in finance, is a sector that I believe holds significant opportunities for Jersey,” said Ozouf.

He emphasized that the government will “offer its full support” for innovative measures undertaken by the industry and the island’s regulator, adding:

“We are working closely with the Commission, industry and Digital Jersey to help develop the Island as a natural hub for fintech business. We are committed to maximising the benefits and opportunities of cryptocurrencies like bitcoin in a well-regulated environment.”

Positive industry reaction

Daniel Masters, Director of GAJL, said Jersey prides itself on being among the top-tier jurisdictions when it comes to compliance, which is why the firm chose to base its bitcoin fund in Jersey.

Masters stressed that GAJL is in a good position to manage the fund:

“Global Advisors is thrilled to be able to bring a robust bitcoin fund product to the market. Our long experience in commodities means we are well placed to manage volatility and performance risks in this fast growing and opportunistic asset class.”

GAJL says leading bitcoin service providers are on board, including Netagio and Elliptic, along with reputable legal advisors and fund administrators.

Elliptic told CoinDesk that it will be providing bitcoin custody services to GABI through its insured storage product, Elliptic Vault.

Dr Tom Robinson, COO and co-founder of Elliptic, said:

“We are pleased to be working with the team at GABI, and look forward to helping other businesses and financial institutions to integrate this burgeoning asset class into their existing processes. This new fund is a significant move forwards for digital currencies: demonstrating that regulators are willing to engage with the technology, and further legitimising it.”

Local tech hub Digital Jersey welcomed the news, saying that it will continue to support several business initiatives looking at ways of using cryptocurrencies in the island, including retail outlets and a potential cryptocurrency exchange.

Paul Masterton, Chairman of Digital Jersey believes the decision could attract global interest:

“The news of this regulated bitcoin fund is extremely positive for Jersey, positioning the island for future opportunities and demonstrating how local businesses can combine the advantages of our well-regulated finance industry with innovative technology. While GABI is a regulated expert fund and not yet a general consumer product, the chance to engage with bitcoin in secure environment will be of global interest.”

Regulation and tax implications

While Jersey is widely seen as a tax haven, this does not mean it closes a blind eye to AML and compliance standards. On the contrary, the jurisdiction has a very robust regulatory framework designed to attract potential investors.

The government says it is committed to introducing an “appropriate and proportionate” AML regime in the field of digital currencies too. The government believes, though, that in-depth analysis of the risks posed by cryptocurrency must be carried out before the new AML regime can be introduced.

In terms of tax implications, the island’s Comptroller of Taxes insists all transactions involving cryptocurrencies must be reflected in accounts and they will be taxable under Jersey income tax provisions relating to foreign exchange. The general sales tax due must be calculated using the sterling value of the cryptocurrency at the time it takes place.

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