The New York Times recently reported that crypto and blockchain startups have increasingly started looking to countries and territories such as Bermuda, Gibraltar, and Malta to establish their businesses – as the USA and most Asian states continue their strict and oftentimes unclear regulatory requirements for crypto-related companies.
On the other hand, in states such as Liechtenstein, a small European sovereign state, crypto-friendly laws have already been passed, as well as legislation being developed to help accommodate blockchain firms. Notably, Liechtenstein’s prime minster had been working on a Blockchain Act this summer which will reportedly let firms sell digital assets.
Crypto Friendly Laws
Meanwhile, there were three new laws enacted on July 4th in Malta that aim to help bring more clarity to how cryptocurrency companies can legally run their operations on the island.
Reportedly, Malta’s flexible regulatory framework will also make it easier for firms to issue their own digital currencies, while being able to trade most of the existing ones.
Additionally, the British island territory of Bermuda introduced clear regulatory guidelines this year that allow local crypto companies to easily launch initial coin offerings (ICOs) by applying directly to the minister of finance.
The premier of Bermuda, Edward David Burt, during a blockchain conference held in New York said in May that the island was looking to become one of the most ideal places for crypto-related startups to run their business.
Creating More Job Opportunities, Boosting Tax Revenue
Commenting on Bermuda’s crypto plans, Burt explained:
We are 65,000 people, and 20 square miles, but we have a very advanced economy. We want to position Bermuda as the incubator for this industry.
One of the main objectives for welcoming crypto firms on the island is to create more job opportunities for locals and boost tax revenue – as the premier noted earlier this year.
Despite there being a number of advantages for smaller nations to facilitate crypto businesses, there are also significant potential risks associated with digital currencies.
Fraudulent schemes orchestrated under the guise of ICOs have been all too common, while some cryptocurrency related scams have even turned into violent crimes.
Significant Risks Associated With Crypto
Cryptocurrency markets are also extremely volatile, which makes them quite risky for SMEs – with many cases of hackers stealing large quantities of digital currencies after gaining access to users’ private information.
This month, the US Justice Department charged over 12 Russian intelligence officers after they allegedly hacked the Democratic National Committee’s computer networks. The hackers had reportedly used Bitcoin (BTC) to buy computer hardware used to hack government computers – presumably using the cryptocurrency to make it more difficult to trace their transactions.
Due to these exploitative activities, the US Securities and Exchange Commission (SEC) has been overwhelmed as it tries to provide clear regulatory guidelines for cryptocurrencies.
Although SEC chairman has previously remarked that decentralized digital currencies such as Bitcoin (BTC) and Ethereum (ETH) may not be securities, the federal regulator has yet to introduce a comprehensive regulatory framework for the burgeoning crypto industry.
As a result, a number of blockchain startups have moved their operations to Puerto Rico and the other crypto-friendly destinations mentioned – some of which are considered to be a tax haven for cryptocurrency firms.