Jersey introduces ‘sandbox’ reforms to test virtual currency

Jersey has introduced a ‘regulatory sandbox’ to enable businesses that provide virtual currency exchange services to experiment and test new products and applications in the crown dependency

Changes to two pieces of legislation that were approved unanimously in June are now in force.

The coupled effect of the reforms and an exemption order means that amendments to the Proceeds of Crime and the Proceeds of Crime (Supervisory Bodies) laws establish a £150,000 turnover threshold for exchange services to develop and test innovative products, services, business models and delivery mechanisms without having to fulfil all of the same regulatory burdens of a bank or other regulated entity.

The changes make virtual currency exchange a supervised business and require exchange services to register with and fall under the supervision of, the Jersey Financial Services Commission (JFSC).  Once an Exchanger hits that £150,000 annual turnover threshold, it will then be subject to the usual supervision and fee regime.

Virtual currencies, also known as cryptocurrencies, are mediums of exchange in cyberspace using cryptography to secure transactions and control the creation of new units. Initially highly controversial, the best known is Bitcoin, though Ethereum and Litecoin are also widely used. Today, there are more than 740 virtual currencies in use around the world.

Sara Johns, technology partner at law firm Ogier, said the move balances the requirements of regulation with the desire to create freedom to experiment and innovate in the virtual currency space.

She said: ‘With virtual currency transaction values and volumes ever increasing globally, virtual currencies are breaking into the mainstream. A balanced regulatory approach will encourage further development of this Fintech here in Jersey.

‘That said, the technology is still developing, and there’s an enormous amount of work to do in developing and testing new products, services, business models and delivery mechanisms.’

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