Virtual Currency Legislation Underway In Island Of Jersey

Digital currencies such as bitcoin are increasingly being adopted worldwide. While it has the potential to disrupt traditional banking system, it poses serious risk for money laundering and terrorism financing. Understanding this threat, government authorities are coming forward with legislations of the virtual currency business - New York’s BitLicense, California Bitcoin Bill.

CoinDesk reported on Wednesday that government of Jersey is working on its plans to pass similar legislation for regulating virtual currency businesses next year. The Chief Minister’s Department of Jersey has released a policy document in this regard.

The document outlines the approach to digital currency regulation that will focus on exchanges, ATMs and other services that connect digital currencies with traditional ones. However, given the nascent state of the technology, the government’s seeks to avoid creating a full licensure regime.

The government’s outline states that companies “acting as an interface between legacy financial systems and virtual currencies, e.g. virtual currency exchanges and Bitcoin ATM operators” will fall under statutes governing the activities of money services businesses. They would be required to register with the Jersey Financial Services Commission (JSFC), the island’s top finance regulator.

Moreover, companies that process more than £150,000 in annual transactions will be subject to JFSC supervision, adhering to compliance rules and paying an undisclosed annual fee, while those who process less than that amount would be classified as exempt and not be required to undergo the registration process, face active oversight or pay the related fees, CoinDesk reported.

The JSFC would have regulatory power over exchange services on the island, including those who fall below the £150,000 threshold.

“The JFSC will supervise compliance of virtual currency exchangers with the Money Laundering Order and other AML/CFT legislation - except exempted virtual currency exchangers,” the outline states. “However, the JFSC will still have the necessary powers to investigate exempted virtual currency exchangers compliance with the Money Laundering Order and other AML/CFT legislation – as and when necessary.”

In a statement, Jersey’s assistant chief minister, Senator Philip Ozouf, said he was moving to bring draft legislation to the island’s parliament, the States Assembly, in early 2016, CoinDesk reported. However, he has made provision to consider different regulatory approach in the future, suggesting that the government may think over the issue as Jersey seeks to draw in digital currency companies.

“The policy document on regulation should not be viewed as final; it should be viewed as acting as a starting point,” he said.