Lee Hills, CEO of blockchain regulation specialists SolutionsHub, explains why the Isle of Man’s renowned support for crypto technology businesses could come to the rescue of more than 150 companies reportedly “left in limbo” by UK regulators.
There is a significant backlog of cryptoasset companies waiting for Financial Conduct Authority (FCA) registration in the UK, some of which have been waiting for months, according to reports.
Apparently, only a small number have been registered so far – and the clock is ticking. According to the FCA, if they are not registered by January 10th, they will be forced to cease operations.
EU member countries (plus post-Brexit UK) have until January to bring their domestic laws into full compliance with the 5th Money Laundering Directive (5MLD).
Before that date, each participant country should have updated its legislation, given the need to fully comply with 5MLD by January 10, 2020. There are, however, countries that have not completed this process.
The FCA has its own guidance on how to comply with this directive. There is the directive, the law itself, and then the FCA guidance. The FCA website states that entities submitting an application need to follow their guidance and not only the 5MLD.
5MLD brings cryptoasset companies under the requirements of the ML Directives meaning they have obligations regarding due diligence when onboarding customers, the filing of SARs and ensuring senior staff are fit and proper. However if the FCA are struggling to process the number of applicant companies by the deadline these companies must lack confidence that their operations will remain legal. A Plan B is required to give these companies the certainty they require.
An Island refuge?
So it seems there could be some sleepless nights ahead over the Christmas period for the owners of those businesses who do not know if they will be FCA registered and 5MLD compliant in time, but they do not have to look far for a potential solution.
The Isle of Man is renowned for its welcoming approach to blockchain based businesses and I know of at least one company that has moved from the UK to the Isle of Man after entering the FCA registration process in the summer but still not becoming registered.
The Island has a history of supporting companies as they relocate and launch, having moved from jurisdictions where they have experienced teething problems implementing new regulatory frameworks.
Most jurisdictions go from zero to 100 in terms of regulating this relatively new industry. This is a perfectly reasonable and rational approach to quickly close the gap on potentially bad actors within the industry.
However, in 2015 the Isle of Man took the decision to create an approach based on supervision. This is more flexible and proportionate to the needs of businesses, while protecting the integrity of the finance sector and the international reputation of the Island.
As a by-product it offers speed to operations, clarity on expectations and reasonableness of price and crypto companies left out in the cold by regulators elsewhere will find we do things differently here.
SolutionsHub has a wealth of experience and expertise in blockchain regulation. To find out if your business could benefit from the Isle of Man’s supervisory regime, email email@example.com.