With controversy continuing around “virtual” currencies such as Bitcoin and their use and possible misuse, the government of the Isle of Man announced today it intends to create a regime protecting firms and customers using such media of exchange.

With controversy continuing around “virtual” currencies such as Bitcoin and their use and possible misuse, the government of the Isle of Man announced today it intends to create a regime protecting firms and customers using such media of exchange.

The island’s Department of Economic Development said it intends to take “specific actions” to protect businesses and customers using digital currencies while providing an “environment for high-quality businesses in this rapidly emerging field who wish to operate here”. Digital currencies will be subject to anti-money laundering controls.

As Bitcoin, the best known of the electronic forms of money that some have seen as a challenge to state monetary systems, has developed, it has prompted fears that it could become a conduit for illicit transactions for drugs, or be used by terrorists. On the other hand, critics of state, “fiat money” regimes argue that Bitcoin and similar systems are, like gold, a healthy form of competition that curbs the ability of states to print money at will.

“‘The Isle of Man recognises both the risks and opportunities presented by digital and virtual currencies. We are conscious of issues that have surrounded these activities but also can identify serious and credible entrants to the market wishing to explore this innovative technology. Therefore, the government has instructed the relevant departments and statutory bodies to ensure there is a regime that promotes both business opportunities but also applies appropriate anti-money laundering requirements,” Peter Greenhill, director of E-Business Development at the Isle of Man, said in a statement.

“Our stance is intended to welcome those who can meet the necessary standards while also preserving the Island’s good reputation as a financial centre. We will work with the Isle of Man Financial Supervision Commission, Department of Home Affairs and industry to ensure a fair and appropriate regime is implemented. This is not at this stage expected to embrace a full prudential suite of requirements, so consumers will need to be aware of this when making their decisions.

As far as the Isle of Man is concerned, the term “digital currency” covers all forms of electronic money that do not have legal tender status.  

The IoM government said it wants to recognise digital currencies as a property, rather than a currency, and apply the appropriate anti-money laundering controls where necessary.

Among details of the government’s position, it said it intends that crypto and digital currencies be brought within the purview of the Proceeds of Crime Act 2008 and the Designated Business (Registration and Oversight) Bill 2014 to ensure that the activities undertaken are subject to the anti-money laundering legislation.

A business that needs to register in the area of digital/crypto currencies will have to register with the Financial Supervision Commission on the island and provide information to authorities to ensure it complies with the law on AML controls.