After “throw(ing) its arms wide open” to the burgeoning crypto sector last year, the Isle of Man is now imposing stricter requirements on “convertible virtual currency” (CVC) businesses registered there.
Namely, crypto businesses on the island will now be obliged to have two local “resident directors” on the board, and, “management and control of the CVC business must be in the Island.”
The Isle of Man Financial Services Authority (IOMFSA) says the new requirements are being done for the sake of oversight and compliance with anti-money laundering and anti-terrrorist financing laws:
“In order for the IOMFSA to be able to successfully undertake its statutory duty of overseeing the compliance of designated businesses with the AML/CFT legislation, designated businesses must have sufficient real presence to facilitate oversight.”
Anything less, “is considered to pose an unacceptably high risk of money laundering and terrorist financing,” says the IOMFSA.
Product standards are also being considered.
The regulator will now refuse to register any business issuing a virtual currency or token that, “provides no benefit to the purchaser other than the CVC (convertible virtual currency) itself”:
“Examples of this include, but are not restricted to: ICOs (initial coin offerings) which convey — limited or no rights to the income generated from a project; limited or no rights to use the assets developed, purchased or acquired from the funds raised by the ICO; ICOs where there is no reasonable basis for any expected capital growth of the value of the CVC.”
ICOs for a time were regarded as a possible quick way to capitalize innovation while giving retail investors exposure to the risks and potential rewards of startup investing.
Thousands of ICOs later, many are concerned that the fundraising method brought millions of dollars to companies with neither the wherewithal nor the integrity to follow through. Regulations are now tightening.
Any ICO issued with the features above will from now on, “(be) generally considered by the IOMFSA to pose an unacceptably high risk that the money raised from the CVC issuance could be used for unanticipated and illegal purposes, as well as posing a risk to consumers.”
As well, all staff put in place at an Isle of Man-registered virtual currency business will have to prove themselves “fit and proper” to the IOMFSA, must have no criminal record for financial offenses, and must be adequately-experienced and trained to fulfill his or her duties at the firm.