Great Britain has long been a “classic offshore” with low tax rates and excellent conditions for doing business: a developed banking system, large stock exchanges, etc. The UK is good for setting up a company, but the ICO is still better to be conducted in more suitable jurisdictions, for example, the Cayman Islands or the British Virgin Islands.
The UK is one of the leaders in the development of blockchain projects and cryptocurrency, and one of the most favorable and convenient jurisdictions for conducting cryptocurrency-related business. This is also confirmed by the report of the Atomico venture fund. The state openly supports start-ups that are associated with digital currencies. In addition, the United Kingdom has a well-developed banking and financial sector, as well as all necessary infrastructure for a comfortable business.
Despite the general support of the ideas of implementing blockchain and cryptocurrencies in the life of the state and citizens, the final position of regulators on the legal aspects of activities related to cryptocurrencies has not yet been worked out. In fact, the cryptocurrency is in the grey zone, i.e. in a legal vacuum. For this reason, there is a possibility of introducing a special regulation that can play against companies that have chosen the United Kingdom for ICO.
British companies are used as project headquarters and the release of tokens is carried out in more “favorable” jurisdictions such as the Cayman Islands, the British Virgin Islands, Switzerland or Singapore.
Legal Regulation of Cryptocurrency
In the period from 2014 to 2017, the Financial Regulations Authority of the United Kingdom (the FCA) stated that the cryptocurrency can in no way be regulated by UK financial law.
For example, the Electronic Money Regulations (EMR 2011) states that cryptocurrency is not “electronic money”, since its emission is not centralized. In this regard, the relevant organizations do not have the authority to regulate cryptocurrencies. Cryptocurrency is also not a “value” in accordance with the Payment Services Regulations 2009 (PSR 2009) and, it is not a banknote, a coin, electronic money or other monetary units (scriptural money).
Thus, the UK’s cryptocurrencies are currently still considered to be a unique combination of numbers, which is derived from complex mathematical calculations and algorithms. Therefore, bitcoin and other cryptocurrencies are not subject to the Law on Countering the Legalization of Proceeds Derived Illegally (The Money Laundering Regulations 2007, hereinafter referred to as MLR 2007), as well as other provisions of UK financial legislation.
Legal regulation of the tokens and ICO
In September 2017, FCA also told in the interview to The Financial Times that most of the tokens sold under various ICOs fall under the current legal and regulatory framework of the country.
“Many ICOs do not fall into a regulated field. Nevertheless, depending on the structure and features of the token, some of the investments may be regulated by law. Companies and firms participating in the ICO can carry out regulated activities, “said the representative of the FCA.
True, the regulator did not specify in which cases the provisions of the legislation in the sphere of securities and the stock market will be applied, and in which there are not.