The Financial Times reported that Alderney, just three miles long with a population of 1,900, wants to become known as an international center for bitcoin transactions. Intended to be fully compliant with anti money-laundering and other financial regulations, it would offer merchant payment services, exchanges, and a bitcoin storage vault of some kind.
The physical bitcoins, like other such tokens, would be collectors’ items rather than circulated, and would likely have a gold content (apparently around £500 worth) to further their appeal and allow them to retain value should bitcoin’s price crash. They would also serve as promotional tokens for the more ‘serious’ bitcoin payment and exchange services.
Alderney’s coins would hopefully be minted in a collaboration with the UK’s Royal Mint as part of a commemorative collection. Rather than having a private key sealed inside, like the popular Casascius physical bitcoins and their contemporaries, the Alderney bitcoins would be exchangeable for the more useful digital kind by its holder paying a visit to the island. They would not be official legal tender otherwise.
Production would be overseen by an independent company, who would also take the hit if bitcoin’s value vanished. The same company would also hold the coins’ keys in an escrow service. If the deal goes ahead, The Royal Mint would handle orders and take some of the money from sales.
With current bitcoin values hovering around $1,100 on CoinDesk’s BPI (over $1,200 on Mt. Gox) and seeming to jump higher with each passing day, more daring segments of the financial world are sensing an opportunity to create a whole new industry. The high values, including not only bitcoin’s but those of other digital currencies as well, are wrenching the concept out of the hands of tech-savvy entrepreneurs and delivering it to people more accustomed to billion-dollar movements.
Bitcoin and digital currencies, despite occasional murmurings and investigations by authorities, still have no legal recognition as currencies in any major jurisdiction. No legislation has been tabled specifically for digital currencies, though exchanges and payment processors generally fall under the same know-your-customer (KYC) and anti-money laundering (AML) regulations as other ‘money transmitters’.
The Channel Islands, just off the coast of France, are ‘Crown Dependencies’ and not officially part of the UK. This special legal status has traditionally made them a hub for offshore financial services, with most of the activity happening on larger Guernsey and Jersey.
Alderney falls under the jurisdiction of the Bailiwick of Guernsey but has been looking for ways to gain more financial independence from its neighbors. The island has long produced stamps and minted its own coins, called the Alderney pound, pegged 1:1 to UK pound sterling. The coins are produced in denominations of £1, £2 and £5 in ordinary cupro-nickel as well as gold and silver versions, and are also aimed primarily at collectors.
Focusing on bitcoin would further differentiate Alderney’s offshore services from those of Guernsey and Jersey. Alderney’s government also passed legislation in May 2000 to establish the island as a center for online gambling, altering it in 2005 to enable gambling operators advertising in the UK itself. More recently, Alderney has also sought to establish a renewable energy (mostly wind farming) industry.
The islands’ appeal to offshore financial services clients lies mainly with their proximity to Europe and status outside UK/EU jurisdiction, advanced telecommunications infrastructure, English language, and retention of British legal tradition and culture.
Though it has a reciprocal tax agreement with the UK and Jersey, Alderney itself has no Value Added Tax, no capital or inheritance taxes, no tax on trusts whose beneficiaries live outside the island, and no tax for exempt companies doing business outside the Channel Islands.
Alderney flag image via Shutterstock