Digital currencies such as Bitcoin could become a significant part of the island’s economy as the industry gains mainstream acceptance and a new regulatory structure is put in place, according to a local expert.
Peter Greenhill, director of e-business at the Department of Economic Development, told the Examiner: ‘Over time I think digital currencies will be a major contributor to the island as we’re one of the few, if not the only jurisdiction to have said “this is what we’re doing and this is how we will control the market, and if you want to follow proper rules come and talk to us”.’
Bitcoin, the most successful virtual currency to emerge to date, is a payment system which is outside the control of any national government and removed from conventional banking.
Customers can buy Bitcoins either as an investment or as currency which can be used to buy real-world goods and services from a growing numbers or retailers, including major brands like travel and hotel website Expedia.
Mr Greenhill explained how the technology can benefit both businesses and consumers.
He said: ‘For micropayments in gaming and many other industries, digital currencies provide a very quick, very efficient and very cheap method of doing it. Another major market is people transferring money – the costs of doing it the traditional way can be incredibly prohibitive, whereas in a digital currency environment you can do it for almost nothing as a peer-to-peer transaction, taking the banks out of the equation.’
There has been an explosion of local interest in the sector with several companies setting up Bitcoin exchanges in the island, the formation of industry group the Manx Digital Currency Association and last week’s announcement of the Crypto Valley Summit, an conference taking place in the island in September.
Mr Greenhill explained how the Isle of Man is well placed to meet the demand:
‘Something that we can do is move nimbly to look at opportunities like this. We’ve got the technology base, which is largely thanks to E-gaming. We have brilliant data centres and connectivity on the island compared to other jurisdictions.
‘At the moment we have 15 to 20 companies in the island actively looking to get up and running and we have companies looking to recruit staff as we speak. It has moved forward very quickly.’
The government is moving to establish a regulatory regime for operators of Bitcoin and other virtual currency exchanges looking to operate in the island.
An amendment to the Proceeds of Crime Act 2008 is currently being drafted which will impose ‘know your customer’ and anti-money laundering requirements on digital currency businesses, similar to those seen elsewhere in the financial services industry.
Mr Greenhill noted: ‘By putting those kinds of controls in we automatically attract the top end of the market, the ones who want to have that stamp of approval. We’re making it clear very early on what type of regime that we want to run.
‘In an industry that’s moving so quickly we couldn’t spend two years putting together a complete new Bill to go through Tynwald because by the time we wrote that it would be out of date anyway. We’ve got to recognise that and build up these controls as we go.’