Isle of Man Regulator Says Bitcoin, Ether Not Considered Securities in New Guidance

The financial watchdog of the Isle of Man, a self-governing British Crown dependency, has clarified how it will treat cryptocurrencies and other tokens, and which might be regulated as securities.

• Published late last month but announced Thursday, the island's Financial Services Authority (FSA) said the perimeter guidance is aimed at giving companies greater clarity when setting up blockchain-related business in the jurisdiction.
• Developed in partnership with Digital Isle of Man, an executive agency within the government's enterprise department, the guidance is aimed to be "technology neutral," according to the document.
• The FSA said the precise treatment will depend on the nature of the token, and the watchdog will consider "substance rather than form."
• While some cryptocurrencies like bitcoin and ether fall outside its regulatory oversight, companies operating with such assets mustnregister with the FSA as “Designated Businesses” and comply with anti-money laundering and countering the financing of terrorism requirements.
• Such entities will not require a financial services license.
• Those carrying out activities with tokens that "have the characteristics of securities or electronic money" will be regulated by the FSA.
• The guidance suggests that tokens offering profit, income or capital growth would be regulated as security-like investments and would require a financial services license.
• These tokens would come under the same rules that would apply if the investment were made via other means such as share certificates.
• Tokens or cryptocurrencies that offer a store of value or access to services and are not a form of e-money would be unregulated.
• Calling the development a "milestone," Steve Billinghurst, regulatory lead at Digital Isle of Man, said the guidance is likely to evolve further in line with the changing regulatory situation in other major jurisdictions.

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