Small jurisdictions like the Isle of Man are being used as proving grounds for the maturity of blockchain, an opportunity they can use to become centres of knowledge for the new technology. That’s according to Lyle Wraxall, CEO of the Digital Isle of Man Agency.
Speaking on the sidelines at London Blockchain Week, Wraxall said that larger countries are looking at smaller jurisdictions as a regulatory “weathervane”. “The Isle of Man has been cited by the UK Treasury as one of the jurisdictions to watch. They’re willing to let the smaller ones take the risk to learn the lessons, and the larger regulatory bodies will follow. It gives small players like us the chance to innovate, do something new. I’d like to think that when blockchain becomes mainstream smaller bodies will have a role to play in being centres of knowledge for dealing with regulatory challenges.”
The Isle of Man is planning to grab the attention of blockchain businesses with two new initiatives – the Blockchain Office and Isle of Man Sandbox. Both have been in development since September 2018 at Wraxall’s agency, a group within the island’s Department for Enterprise.
Blockchain “came out of the gates” without the required regulatory oversight, added Wraxall. “Regulation is lagging behind where it should be, and that lacking has led to a lot of the negative things that have happened in this space and created an image of a morally grey technology.
“It’s the smaller jurisdictions that are really focused on this, striking the balance between moving quickly and moving appropriately,” he said. “If what you do becomes a success, there can be temptation to do more of it and do it faster, and that’s the wrong thing to do, because that’s what breaks things. We need to keep things sustainable and ensure that we don’t suddenly start becoming a first mover, there’s a lot of risk in that.”
Just under 11% of the Isle of Man’s GDP comes from the financial services sector, aided by the country’s tax regime. Entrepreneurs are exempt from capital gains tax if they start a business on the island. It also has one of the lowest personal tax rates in the world and a 0% corporate tax rate in place since April 2006.
“The core principal of doing what we’ve done is about understanding the challenges which you face. We’re trying to create a more pragmatic way for a regulator to do business with new technology. To do that we need to understand what the regulator is prepared to do and what they’re not prepared to do. A key part of this is to get the local businesses, the government and the regulators all on the same track.
Blockchain, he added, is “at an interesting crossroads”. “I don’t think blockchain is done at all, but maybe by next year people will have stopped talking about blockchain and will be talking about what it’s going to do instead. If people just talked about the applications, it would be a good way to step away from some of blockchain’s reputational problems.” A year, he said, is a long time in the fintech space, and there are “a lot of bridges to repair” for blockchain. “I wouldn’t be surprised if we’re in the same position next year, with people insisting blockchain is dead and us saying it has tonnes of potential.”
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