Isle of Man becoming a hub for cryptocurrency start-ups

The Isle of Man, located in the Irish Sea between England and Ireland, is a self-governing country with population a little over 85000. The island has seen three decades of continuous economic growth and has embraced emerging technological innovations with open arms, including satellites and cellular service. It is now seeking to further diversify its economy, and e-commerce (which includes online gaming) that already accounts for over 20 percent of its £4 billion ($6.2 billion) annual gross domestic product.

It is taking steps to accept digital currencies. Earlier this year, it announced the amendment of the Proceeds of Crime Act 2008 so as to include bitcoin companies and exchanges, operating from the island. These exchanges have to abide by the island's anti-money laundering and know-your-customer (KYC) requirements. Moreover, the Manx Digital Currency Association was set up, as an effective channel of communication between the island's emerging cryptocurrency community and the government.

"To keep crime out and protect the consumer is our absolute priority," says Brian Donegan, an official who helps spearhead the island's pitch to cryptocurrency businesses for the Department of Economic Development.

The island's speedy acceptance of cryptocurrencies comes at a time when it is under high level of scrutiny from the U.K. and other governments for its status as an offshore tax haven. The number of businesses accepting bitcoin is rising gradually and several cryptocurrency start-ups, such as Coincorner and TGBEX, are being set up.

Nick Williamson, who dropped out of Illinois Institute of Technology to play professional poker, founded Pythia that provides off-the-shelf software customers can use to create and run their own customized blockchains.

In order to prove the viability of Pythia's protocol, Williamson found an unusual partner, the Manx government itself. A register of the island's cryptocurrency companies is being created by the government and, as a pilot project, that register will be stored on a blockchain created using Pythia's protocol.

"The Isle of Man has always maintained a very positive attitude to digital currency and in line with this approach the Government are currently developing a new and wide ranging digital strategy for its own services," said Williamson.

This will make the Isle of Man the first government anywhere to use a blockchain to store official data, Williamson says.

"It just demonstrates our bona fides," Donegan says of the blockchain pilot. "But it also signals that we have a balance between the importance of regulation and being open for business."