The Isle of Man is stepping up its digital asset regulations and including digital currency under the definition of investments, which would subject virtual asset service providers (VASPs) to tougher financial industry regulations.
The Isle of Man, a self-governing British Crown Dependency in the Irish Sea, currently
requires VASPs to register with the Financial Service Authority (FSA) and abide by the island’s AML and CFT framework. There are 22 companies registered with the Authority under this setup.
However, beyond AML, VASPs aren’t covered by other regulations, including business conduct or prudential obligations.
The FSA is weighing changing this approach and stepping up its oversight of the digital asset industry. In a recently published paper, the Authority outlined three possible approaches and called on the public for feedback on the best approach.
The first option would be to extend the existing definition of ‘investment’ to encompass ‘crypto.’ This approach eliminates the existing ambiguity on which tokens fall under the regulatory framework and “thereby removes the risk of regulatory arbitrage.”
However, the Authority says this approach has significant drawbacks, including imposing onerous regulations on VASPs initially intended for much larger investment businesses.
Another approach would be to define VASPs as a standalone regulated activity, mirroring the approach adopted by the EU with MiCA.
This approach would “deal with a more specific and consumer-centric type of crypto-asset activity. It would also allow regulatory requirements to be tailored to the sector.”
FSA observed that MiCA is more nuanced and deals with specific elements of digital assets, such as trading, custody, and market making, more precisely than any other approach. It further has stipulations against insider trading, market manipulation, and abuse. Isle of Man is, however, not part of the EU.
Commenting on the proposals, FSA CEO Bettina Roth said that public feedback would give the Authority a better idea 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 stated.
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Source: https://coingeek.com/isle-of-man-weighs-tougher-digital-asset-regulations/