Jersey regulator seeks to calm cryptocurrency fever
The Jersey Financial Services Commission has become the latest jurisdiction to issue a warning to investors about initial coin offerings (ICOs), following in the footsteps of financial services regulators in such other countries as the UK, US, Canada, Germany and Singapore, as investor interest in cryptocurrencies generally, and Bitcoin in particular, continues to grow.
The JFSC’s warning, which may be viewed on the regulator’s website, outlines the nature of ICOs for those unfamiliar with the concept, and identifies the innovative potential of distributed ledger/blockchain technology and fintech more generally, while also lending supportive comments to those who are looking to responsibly innovate in the fintech space in Jersey.
The JFSC statement also aims to highlight the risks and concerns ICOs can pose for retail investors.
Many ICOs are unregulated, the JFSC warning notes, and “operate with no or limited investor protection measures in place”, with the result that “there is a higher risk of fraud, money-laundering or association with illicit activities”.
“A number of other regulatory agencies, including European Securities and Markets Authority and the Financial Conduct Authority have also issued statements providing more information about the risks of this activity,” the JFSC warning adds.
It goes on to point out the difficulties in attempting to regulate ICOs — a seemingly obvious step for a regulator when faced with a financial product that investors seem to like — because they “can take many forms (technically, functionally and economically), and therefore it is not possible to provide a ‘one-size-fits-all’ overview” that might make regulation possible, the warning points out.
In September of 2016 Jersey introduced legislation aimed at enabling businesses interested in experimenting with virtual currencies to do so in a controlled and transparent manner. In December 2016, Ogier Jersey partner Sara Johns, and her associate, Steven Meacher, of Ogier’s banking and finance team, analysed this new “regulatory sandbox” for cryptocurrency businesses, after observing at the outset how “even to many of those who work in financial services, [the world where ‘exchangers’ operate at the interface between the “physical” and the “virtual” value chains, where virtual money, such as Bitcoin, is exchanged for tangible, so-called “fiat” money, and vice versa] is deeply unfamiliar territory, like some remote outpost in Africa”.
To read their observations on the Jersey “cryptocurrency sandbox ” legislation, click here.