The financial watchdog of the Isle of Man, a self-governing British Crown dependency, has clarified how it will treat cryptocurrencies and other tokens, and which might be regulated as securities.

  • Published late last month but announced Thursday, the island's Financial Services Authority (FSA) said the perimeter guidance is aimed at giving companies greater clarity when setting up blockchain-related business in the jurisdiction.
  • Developed in partnership with Digital Isle of Man, an executive agency within the government's enterprise department, the guidance is aimed to be "technology neutral," according to the document.
  • The FSA said the precise treatment will depend on the nature of the token, and the watchdog will consider "substance rather than form."
  • While some cryptocurrencies like bitcoin and ether fall outside its regulatory oversight, companies operating with such assets mustnregister with the FSA as “Designated Businesses” and comply with anti-money laundering and countering the financing of terrorism requirements.
  • Such entities will not require a financial services license.
  • Those carrying out activities with tokens that "have the characteristics of securities or electronic money" will be regulated by the FSA.
  • The guidance suggests that tokens offering profit, income or capital growth would be regulated as security-like investments and would require a financial services license.
  • These tokens would come under the same rules that would apply if the investment were made via other means such as share certificates.
  • Tokens or cryptocurrencies that offer a store of value or access to services and are not a form of e-money would be unregulated.
  • Calling the development a "milestone," Steve Billinghurst, regulatory lead at Digital Isle of Man, said the guidance is likely to evolve further in line with the changing regulatory situation in other major jurisdictions.

Also read: SEC Will Be Forced to Give Crypto Guidance Despite Bureaucracy, Risk Avoidance: Peirce

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