Digital currency businesses will have to comply with the Isle of Man’s anti-money laundering (AML) laws from 1st April and will likely fall under the remit of the Financial Services Commission from the summer.
The Isle of Man government has amended the Proceeds of Crime Act 2008 so it covers bitcoin companies, such as exchanges, operating from the island.
Amendments to the act have been approved and state the following businesses will have to adhere to AML requirements:
“[Those in] the business of issuing, transmitting, transferring, providing safe custody or storage of, administering, managing, lending, buying, selling, exchanging or otherwise trading or intermediating convertible virtual currencies, including crypto-currencies or similar concepts where the concept is accepted by persons as a means of payment for goods or services, a unit of account, a store of value or a commodity.”
These companies will have to report to the authorities if they suspect a person using their business is engaged in money laundering. They will also have to assist in identifying the person they believe is involved.
This means cryptocurrency businesses will have to adopt certain know-your-customer (KYC) practices, collecting ID information so this can be passed on to the authorities if they suspect money-laundering activity.
Amendments are also set to be made to the soon-to-be-introduced Designated Businesses (Registration and Oversight) Bill 2014, requiring the businesses mentioned above to register and be overseen by the Isle of Man Financial Services Commission (FSC).
The bill completed its passage through the island’s legislature on Tuesday. Once it receives Royal Assent, which is expected to take place in the summer, the FSC will become the supervisory authority for AML matters.
In a Hansard document from 24th February, Phil Braidwood, a member of the Legislative Council and the Treasury, stated that schedule 1 of the bill will be updated to include the additional businesses outlined in the Proceeds of Crime Act amendment.
He went on to say that, once the bill is instated, the relevant companies will have six months to register with the FSC.
“Taken together, these measures can only be positive for bitcoin businesses struggling to gain credibility and legitimacy with banks and consumers,” said Siân Jones, co-founder of the European Digital Currency & Blockchain Technology Forum, adding:
“With other changes currently taking place in the sterling clearing systems, the prospect of bank accounts for digital currencies takes a step closer.”
However, Adrian Forbes, co-founder of Isle of Man-based bitcoin company TGBEX, isn’t quite so positive about the news.
“It sends out a positive signal to companies looking at the Isle of Man as a jurisdiction, but the extra hassles/costs will put many startups off and seems unnecessary,” he explained.
Currently, according to Forbes, TGBEX has to collect KYC and AML information from any customer wanting to purchase over €12,000-worth of bitcoins ($13,175), where as, under the new bill, it will need to collect information from anyone buying upwards of €1,000 ($1,096) in bitcoin.
Forbes believes the developments could be seen as good news for bitcoin exchanges, as the licence will increase their credibility, however, he still doesn’t think banks will be willing to provide accounts to bitcoin business owners.
“So it’s just extra hassle and paperwork for everyone. Also, I can’t help feeling it will have every major scam in crypto all over the world looking to come to the island in order to get a licence as well,” he concluded.
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View the Isle of Man’s document in full below: