In June this year, after an intensive period of investigations, the Isle of Man announced plans for a regulatory framework for crypto-currencies. Just a few months on, we now have more than 20 crypto-currency businesses based on the Island including CoinCorner which developed a Digital Currency exchange and payment engines for crypto-currencies, GoCoin and BankToTheFuture. Our local pub in Douglas, The Thirsty Pigeon, along with a number of Corporate Service Providers now also accepts Bitcoin payments.
We also held the inaugural Crypto Valley Summit on the Island in September; a two-day event attended by more than 170 Bitcoin entrepreneurs and enthusiasts, government and private sector representatives from around the world who convened to discuss the future of digital currencies.
So why is it that a small Island in the Irish Sea has become a centre for the crypto-community and crypto-innovation, and is now being dubbed “Crypto Currency Capital of the World”?
Why the Isle of Man?
The infrastructure in place to accommodate crypto-currency businesses has its heritage in eGaming, and before that finance. Power, hosting facilities and data provisions, all at exceptional levels of quality to support high-volume and highly secure transactions for the finance industry on the Island, more than ten years ago, came to be used by eGaming market leaders such as Pokerstars. What also developed in combination with this, was the clustering of the support companies for the industry. Microgaming, Playtech and Derivco followed the consumers of their products to create an e-gaming cluster which continues to grow to the extent that it now accounts for over 13 percent of the Island's GDP and, in combination with ICT, will probably soon form a larger part of the economy than the finance sector.
This is the same journey that Digital-Currency is now embarking upon. The Government is taking an informed and pragmatic approach to registration and ultimately regulation, having shown that it has done this before. This is not only attracting the participants, but their supporting technical ecosystem. This further enhances the digital diversity of the Island, with participants that can (and will) create products and services that are not just dependent on the regulatory or taxation framework, but exist here because of both the clustering and test-bed capabilities. We already have a diverse mix of crypto-currency gaming operators, exchanges and compliance specialists, and are getting more enquiries every week from a variety of different companies.
Importance of security
Whilst we are supporting the establishment of this exciting new sector, it is also important however, to acknowledge the risks posed by digital currencies and outline the Isle of Man's firm policies on security and control.
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. Our stance is intended to welcome those who can meet the necessary standards while also preserving the Island's good reputation. We are working with Isle of Man Financial Supervision Commission, Department of Home Affairs and industry to ensure a fair and appropriate regime is implemented.
The Island is naturally focussed on ensuring all companies concerned with this emerging technology act in a responsible way towards their customers. In the gaming industry, the Isle of Man insists that players' deposits to their on-line wallets are separated and segregated from the operator's own monies. The Bitcoin exchanges that have already established on the Island have demonstrated an understanding of their responsibilities in this regard by setting up constructs on the banking side and by offering “cold storage” for their customers' actual digital currencies (cold storage being a reserve of Bitcoins that is kept offline on a USB drive, paper wallet or on encrypted media where the encryption key is offline for example).
Security is being further enhanced by the potential introduction of “multi-signature control technology”, where a transaction requires the signature of more than one private key for the Bitcoin to be spent. The potential introduction of insurance against loss through fraud or hacking activity, as has been recently announced by AON, will also help to minimise risk to the individual.
In summary, the Isle of Man sees that major benefits could emerge from the acceptance and growth of digital currencies and we see its adoption as a natural progression in the transfer of value globally.
Whether Bitcoin itself will be the only (or main) digital currency of the future is very much open to debate depending upon whether existing payment solution providers try to implement their own alternate versions, but growing acceptance and usage is inevitable. This growth combined with the establishment of other cryptology technologies based on the block chain will produce a major impact on society, in general, and especially the e-gaming industry.
Contributed by Peter Greenhill, Isle of Man CEO e-Business Development