Fintech on Friday: Isle of Man opens its arms to blockchain enterprises
The Isle of Man, the Crown Dependency situated in the Irish Sea, may seem an unlikely hotbed of digital innovation.
The island has a long history in financial services, shipping and high tech manufacturing. But, always keen to diversify and keep the economy evolving, the government has identified the digital world as an area of increasing importance.
This is nothing new. Indeed e-gaming now makes up more than a quarter of GDP and the island has identified blockchain as another digital industry with a bright future.
The Department for Enterprise, responsible for economic development, has five agencies, namely Finance, Business, Locate, Visit and Digital, with the latter responsible for Blockchain Isle of Man, a new initiative tasked with bringing blockchain companies to the island.
“The blockchain office was set up as a kind of soft landing for blockchain enterprises that want to come here,” says Christine Hellman, strategic lead at Blockchain Isle of Man. “We can soften the blow of coming here and trying to navigate through the regulatory waters. We have a good understanding of the kind of hurdles they will have to overcome when they are applying for their licence, if they need to be regulated.”
Part of the package is the Hubb, an office in the centre of the capital, Douglas, where these businesses can gather and hopefully form a community. The Hubb is situated above the Eagle Lab, a Barclays branch which, in partnership with the government, has been transformed into a co-working space for digital innovators and entrepreneurs, another physical example of the island’s digital footprint.
The blockchain office launched in February, became fully operational in April and has attracted just under 30 businesses so far. The initiative has seen interest from across the globe, though not all applications will be successful. “The basic criteria we are looking at when assessing applications is the number of jobs they are going to create,” she says, pointing to a target of 120 jobs over three years.
Given the highly specialised nature of the technology development side of these business, there is a recognition that, initially at least, many of these jobs will be for those who relocate to the island. But the hope is that these businesses will also requiring marketing, finance or sales skills which already exist on the Isle of Man.
The applicants come from all kinds of industries, reports Steve Billinghurst regulatory lead at Blockchain Isle of Man, on secondment from PwC. “These are entrepreneurs identifying use cases for blockchain. It is good that they are not all financial services, because it means that we are not putting all our eggs in one basket. It allows us to maintain a broad footprint, which the Isle of Man is renowned for.”
Crypto winter
Perhaps the best known use of blockchain technology thus far has been in crypto currencies. The best known of these, bitcoin, hit the headlines when its value skyrocketed in 2017, but when it subsequently retreated, many took this as a sign it was doomed to failure.
This is simply not the case, argues Danny Scott, CEO and co-founder of Coincorner, the crypto exchange based on the Isle of Man.
“Bitcoin is going to continue to grow. The ‘crypto winter’ lasted about 18 months, but from an industry perspective, it is a natural occurrence, and it has happened several times, where you have the spike and the hype cycle, and then it comes back down. Then you have a plateau period and it starts to come back up again.”
The Isle of Man may be trying to encourage bitcoin businesses to relocate there, but although the regulatory environment is favourable, banking remains an issue for many, he says. “The key thing for a lot of bitcoin businesses around the world is banking,” says Mr Scott. “So they flock to wherever it is available.”
He lists jurisdictions such as Singapore, Gibraltar, and Malta as being more attractive on this front.
Although he believes bitcoin will continue to grow, Mr Scott is less impressed by Libra, the crypto currency planned by Facebook, which he describes as a ‘stable’ coin, meaning its price is fixed to a currency, unlike bitcoin, which fluctuates.
“There are already several decent sized stable coins out there that are doing exactly the same. This product is no better than anything that is already out there, rather Facebook is just putting its name to it.”
But they are potentially disrupting not only banks, but governments, he warns as the company will effectively be “printing their own money”.
“That is why governments are jumping on this. I am sure there will be more regulations from crypto brought in because of this, and it will have a knock-on effect. But crypto currencies are here to stay, it is just what form they will take.”
