Isle of Man Considers Stricter Regulations for Digital Assets
The Isle of Man is enhancing its regulations on digital assets and has decided to include digital currency in the definition of investments. This means that virtual asset service providers (VASPs) will be subject to stricter financial industry regulations.
Currently, VASPs are required to register with the Financial Service Authority (FSA) and comply with the island’s AML and CFT framework. There are currently 22 companies registered with the Authority under this system.
However, aside from AML, VASPs are not covered by other regulations such as business conduct or prudential obligations.
The FSA is considering changing this approach and increasing its oversight of the digital asset industry. In a recently published paper, the Authority outlined three possible approaches and called for public feedback on the best approach.
The first option would be to broaden the existing definition of ‘investment’ to include ‘crypto.’ This would remove ambiguity about which tokens fall under the regulatory framework and eliminate the risk of regulatory arbitrage. However, the Authority acknowledges that this approach has significant drawbacks, such as imposing onerous regulations initially intended for much larger investment businesses.
Another approach would be to define VASPs as a separate regulated activity, similar to the approach adopted by the EU with MiCA. This approach would address a more specific and consumer-centric type of crypto-asset activity and allow regulatory requirements to be tailored to the sector.
FSA CEO Bettina Roth stated that public feedback would provide the Authority with a better understanding of investors’ concerns and how to best address them. “The Authority’s recent stance has been to maintain a watching brief, but we consider that now is the right time to revisit the issue and encourage feedback on potential options. Any future proposal to extend the regulatory perimeter would, of course, be subject to a separate consultation,” she said.
For more information on blockchain technology and digital currency regulation, check out CoinGeek’s Blockchain for Beginners section.
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