UK’s Channel Islands Tax Haven Luring Investors into Crypto

While the financial world is hesitant to trade Bitcoin because of the recent market crash, the Channel Islands – several small British Overseas Territories – are quietly offering tax incentives to investors to move their money into cryptocurrencies.

Due to their favourable tax laws, Jersey and Guernsey – the two main islands of the UK’s Channel Islands – are attracting cryptocurrency, blockchain, and other fintech companies into their jurisdictions.

Crypto experts based in Jersey and Guernsey recently talked to Business Insider media about how these islands set up efforts to attract crypto and blockchain investors.

Edmund Hatton, a fintech lead at Digital Jersey, told Insider that these islands have not instituted capital gains or inheritance tax in their governance plan, making them attractive locations for investment firms, including crypto firms.

Hatton said that even before cryptocurrency entered the mainstream, Jersey and Guernsey had begun competing for the booming asset class.

Jersey has attracted crypto firms such as CoinShares, which manages assets worth about $3 billion. The Swiss-digital asset investment firm used Jersey to establish its crypto-backed Physical Bitcoin exchange-traded product in January 2021.

Barney Lewis, the CEO of ZEDRA, an investment firm based in Guernsey, told Insider that he made a recent trip to Miami – the major crypto hubs in the US – as part of efforts to lure American crypto investors to the island and away from rival tax havens like the Cayman Islands.

“We’re competing directly against Cayman, and we’re seeing the migration of US funds out of there. Brazilian and South American investors have fallen out of love with Cayman and are moving the capital to Guernsey,” Lewis said.

Efforts by the Channel Islands to lure crypto investors have coincided with the broad plunge of crypto prices over the previous nine months.

The current crypto winter could benefit the landscape by testing key infrastructure, consolidating major companies, and boosting greater efficiency.

Jonathan Van Neste, a partner at Jersey-based Oben Regulatory, told Insider: “In a crypto winter, we could see a consolidation of crypto projects. That would lead to a much more diversified investment opportunity in the crypto, blockchain, and DLT space.”

The experts said the maturation of the digit asset landscape could increase investors’ appetite for low-tax jurisdictions like Jersey and Guernsey.

The experts are optimistic that the Channel Islands’ proactive approach to luring investors will place Jersey and Guernsey in an ideal position to profit when cryptocurrencies make them come back.

Lewis said although “crypto and digital assets adoption has been slow in the fund’s space, we have to hope we’re well-placed for the next cycle.”

Investing in Cryptocurrencies

People in Jersey and Guernsey have shown the same interest as their counterparts in the UK as residents are increasingly buying into cryptocurrencies.

Reports show that one in five citizens in Jersey and Guernsey own cryptocurrency. Younger people in these islands already used digital assets such as Bitcoin to transact online.

The next generation in the wider UK has already adopted crypto assets and is already using them, despite leading regulators urging caution.

Inflation has been a major driver for people adopting such virtual assets across international countries that have seen currency devaluation.

In January this year, Guernsey launched its first cryptocurrency fund, which is now available to institutional investors.

Image source: Shutterstock


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Jacobi Asset Management Firm Wins Approval to Launch Bitcoin ETF In Guernsey

A new Bitcoin exchange-traded fund (ETF) has been approved in Europe. The development came before U.S. investors received their first Bitcoin futures-linked EFT from the Securities and Exchange Commission (SEC) last week on Friday afternoon. (67).jpg

On last Friday, October 15, Jacobi Asset management firm in Guernsey, an English crown island, announced that it got approval from regulators to launch a physically-backed Bitcoin ETF.

The Guernsey Financial Services Commission gave Jacobi Asset management approval to launch what it described as the world’s first “Tier 1” Bitcoin Exchange-Traded Fund (ETF).

The founder and CEO of Jacobi, Jamie Khurshid, a former Goldman Sachs investment banker, talked about the development and said:

“We are excited to be launching a new secure, transparent, and accessible product to track the performance of Bitcoin. We are a de-risking investment in crypto by removing the technology risk associated with the physical asset and counterparty risk associated with traditional funds or tracker products that are unregulated leverage debt instruments.

“We are proud to collaborate with Europe’s reading regulated firms for a truly tier 1. Offering to service market demand, subject to the necessary regulated approval, this is an exciting moment for Europe as regulatory approval comes ahead of those waiting for a decision from the U.S. Securities and Exchange Commission,” Khurshid added.

Khurshid further explained that “Tier one” means the ecosystem of Tier 1 partners. “We are in the process of listing on a Tier 1 exchange, and all the firms supporting the fund are top tier,” he stated.

Jacobi stated that it plans to list the fund on the pan-European equity exchange Cboe Europe, pending listing approval from the U.K.’s Financial Conduct Authority (FCA).

Fidelity digital assets will provide custody for the ETF, which Jacobi describes as a fully regulated crypto-backed financial instrument.

Jacobi Bitcoin investors will benefit from the security of Fidelity Digital Assets, designed to enable its institutional investors to safely secure, trade and support investments in digital assets.

Launched in May 2021, Jacobi intends to shape the future of digital asset management by bringing together expertise from banking, regulation, and Fintech who helps design, issue, and manage institutional crypto products and funds connected to digital assets.

The Jacobi Bitcoin ETF has a $100,000 minimum and is only open to institutions when it launches. The ETF carries a 15% management fee.

Jacobi disclosed that its team has been working on securing regulatory approval for more than nine months. The firm further stated the successful approval now makes the fund the first European ETF wholly invested in Bitcoin, joining only two others worldwide in Brazil and Canada.

While Europe has several firms (such as CoinShares) providing Exchange-Traded Products (ETPs), Jacobi stated that its Bitcoin ETF’s regulated status would set it apart from other products in the market.

In the FAQ section of its website, Jacobi states that ETFs differentiate from ETPs, such as exchange-traded commodities (ETCs) and exchange-traded notes (ETNs) in several aspects, including liquidity, regulation, settlement, and structure.

“None of the ETPs in Europe are regulated because they’re all ETNs. The Jacobi Bitcoin ETF will be the only regulated crypto product and is approved as an ETF,” Khurshid highlighted.

Image source: Shutterstock


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