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The Isle of Man is a self-governing British Crown dependency that is situated between Great Britain, Ireland, and the Irish Sea. Queen Elizabeth II heads the state holding the title of Lord of Mann and is represented by a Lieutenant governor. The United Kingdom has its responsibility towards the island’s military defense under constitutional obligations. It also has its financial governing authority as well as a parliament.
The island has released a document elucidating how it intends to define cryptocurrencies like Bitcoin. The country’s Financial Services Authority (FSA) has stratified cryptocurrencies in terms of the functions they provide. The announcement came on 14th October when it said that a documental guideline is extremely important as it would help businesses smoothen their interaction with cryptocurrency. As per the initial views of the document, it posits cryptocurrencies in a friendly manner. It has also additionally offered a framework for businesses to work with crypto assets.
The guidelines so created have been a joint effort by the team comprising the FSA and the Digital Isle of Man which is an executive agency spearheading all the technology moves on the island. The document has been prepared with finer details and as per everyone’s agreement has remained technology-neutral.
The encircling progress and result were that many of the popular and upcoming cryptocurrencies will be defined in terms of legal standards about what their role will be instead of how they are created.
“The guidance is aimed at those who are considering selling, issuing, managing or administering crypto assets/tokens (in this guidance ‘tokens’), and illustrates which token-related activities, undertaken using Distributed Ledger Technology (‘DLT’), may have regulatory implications.”
The authorities have also laid out a one-glance chart for ease of understanding.
Source: FSA
Essentially speaking, the document enumerates that the tokens can be further divided into investments, e-money, or are unregulated. This kind of categorization is chiefly dependent on how the token functions. The FSA breaks down the document further into groups.
Security tokens will be those tokens that will have the same function as shares, debentures, derivatives, or units in a collated investment pattern. Bitcoin and Ethereum, considered as a store of value and currency for the virtual machine, have not come under the segregation of securities under this new classification.
But those investments that provide the functionality of security or electronic money will also be regulated by FSA. The formal route of obtaining a license may not be a necessary thing to fulfill. But those securities that offer capital growth or in simpler terms are investments will require a license. A store of value asset could be unregulated and any token that could be exchanged for money may be considered e-money. Hence this only leaves Bitcoin and Ethereum in the shadow zone whose status is still not clear.
Hence whether or not the token is considered a security, it has to be registered as a Designated Business and it also has to conform to all the obligations under Anti-Money Laundering (AML) as well as anti-terrorism requirements so that it can be legally used in the island.