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Guernsey Shuns 'Risky' Digital Currency Business

by Jason Gorringe, Lowtax.net, London
01 March, 2018

Guernsey regulator, the Guernsey Financial Services Commission, said recently that while it has a policy of encouraging innovation it would be cautious about approving the establishment of a digital currency exchange on the island.

Noting the significant risk of fraud and/or money laundering, the Commission said it would similarly be cautious about approving applications for initial coin offerings, where an individual receives a token or coin in exchange for an investment into a company or alternative vehicle, where the coin could then be traded on a secondary market.

The Commission said it accepts that professional investors with a high-risk appetite may wish to invest in this developing sector, but that there are significant risks for retail customers in the use of virtual currencies or cryptocurrencies.

The regulator said virtual currencies or cryptocurrencies could interact with Guernsey's regulatory laws in a number of ways, and that any application would be assessed on its individual merits, using the same criteria for other asset types or structures. This means the Commission would look to ensure that key controls are appropriate - for example around custody, liquidity, valuation of assets, and investor information.

The Commission said its current Handbook for Financial Services Businesses on Countering Financial Crime and Terrorist Financing already permits the use of technology for customer due diligence, and that it would expect any applicant to demonstrate how it plans to comply with the island's current laws and rules, especially when establishing the identity of investors and beneficial owners.

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