At the start of last year, Chris Griffin was new to the cryptocurrency scene, but in June of 2017 he helped with the launch of the world’s first crypto-denominated fund from Jersey-based company, Global
Advisors.
‘I knew very little about crypto this time last year, but because we did this one fund, suddenly people started making enquiries,’ he said. ‘I spent most of my evenings reading and learning and getting up the knowledge curve along with lots of other service providers in the Island.’
Chris helped with the set-up of the Ether-denominated cryptocurrency fund, which utilised the new Private Fund Regime, set up for funds operating with a small number of sophisticated investors. It wasn’t straight forward and as the world’s first, it was a brave step for the Island. ‘The JFSC authorised the fund at a time when bitcoin as an asset class wasn’t understood by the mainstream, it was quite fringe, so this was a real statement of intent by the regulator that Jersey was open for the right sort of crypto business.’
Within months, Chris was helping ARC Fiduciary with the Island’s first Initial Coin Offering, or ICO. It saw the launch of the ARC Reserve Currency, an asset-backed digital currency: ‘That was when we really girded our loins with the regulator and government and rolled up the sleeves and that was the first one where we did real thinking, because I think at that time everyone was talking about ICO’s but JFSC was saying until we actually get an application we can’t spend our time donating resources to a hypothetical scenario.
‘Then we got the application from ARC. They really wanted to do it out of Jersey. They liked Jersey’s reputation as a well regulated jurisdiction.’
Everyone was able to move quickly: ‘Luckily on this island our existing legal and regulatory framework can accommodate quite a lot. We don’t need that time-consuming consultation process for lots of new law just to cater for digital assets. We’re in a good place in that
regard.’
Since then, Chris has worked on several more ICOs, a few of which have been publicised and a few which haven’t yet been. An ICO is a very different beast to a cryptocurrency fund: ‘It’s a cryptographic form of equity crowd funding, whereas a fund which just happens to invest in crypto assets is very different.’
There are many other jurisdictions around the world which have regulatory regimes for crypto funds, but says Chris: ‘Jersey is a good place to do it because on the back of Softbank, the biggest fund in the world, and certain other funds that are here, Jersey is a good funds jurisdiction and if you tie that up with crypto that makes it even better.’
ICOs, however, are currently subject to a race, as countries compete to become the leading ICO jurisdiction. At present, Zug in Switzerland, Malta, Gibraltar and Cayman are some of those competing for the business.
Chris says that Jersey has adopted a sensible approach to ICOs: ‘Most ICOs don’t launch. Over half failed last year to reach their target amount. Often they’re not particularly good commercial ideas, they
fail.’
So what is Jersey doing? ‘The JFSC has said, look, when the dust settles and the ICOs that have got decent people behind them, decent governance and a decent business idea – those are the sort of ICOs Jersey wants to host.
‘Jersey is not a cryptographic free-for-all, and I don’t think we want to be a free-for-all either. So one thing we’ve said to the JFSC and agreed with the JFSC is that we are all stakeholders in the Island’s reputation. We only want to put in front of the JFSC those ICOs which look and feel right. There are all sorts of jokers out there doing ICOs. I’ve lost count of the number of enquiries I’ve turned down. So the ones we put through to the JFSC are good
ones.’
So, we come to Binance. The MOU to set up a crypto-to-sterling exchange in Jersey was signed on 11 June, but what people won’t realise is that the initial email from Stephen Sonberg, Binance’s business development manager, was received by Carey Olsen just three weeks before: ‘Jersey operated at its best here.
‘Because I’d got the background and the relationship with the JFSC in the crypto space and ICO, I set up an initial call between Stephen and myself, but also with the lead policy advisor, Tom Fothergill; government, and with Wanda Adam and Julian Lamb at the registry who do all the ICO work, to introduce Stephen to the stakeholders. He asked whatever questions he wanted.
‘It was a very positive call and he was very pleased on that initial call he was talking to the powers-that-be straight off the bat.’ That speed won Jersey the business. Our Island wasn’t the only one which Binance had been considering.
‘Tom Fothergill, to his enormous credit, took it the next step and they flew over and really liked what they saw here. They enjoyed the fact that we’ve got Digital Jersey as a digital hub, they enjoyed the fact that people weren’t sycophantic with them – they asked the right questions.
‘The JFSC were engaging and very honest with them and Binance were pleased that we’ve got the right things here.
‘We’ve got everything that Binance need, with the exception of banking, but Binance can do the banking piece elsewhere. One thing I would like is Jersey banks to get up the knowledge curve on the crypto
space.’
Law firms, like Carey Olsen, are gateways into Jersey for businesses that could provide a great deal of benefit to our local economy. They’re often the first port of call for those who need to understand the regulatory regime.
The digital sector is big business – consider the fact that the top six most valuable companies in the world are digital: Apple, Amazon, Alphabet (Google), Microsoft and Facebook. So, can Jersey potentially become a centre for digital and, in particular, crypto?
‘One of the advantages Jersey has, in common with other small jurisdictions, is that we can move quickly.
‘If you look at the UK, there are endless consultation papers between the FCA, the Treasury, the Bank of England. All those institutions move very slowly.
‘I can pick the phone up to the JFSC and say this is what we’re planning to do, this is our thinking on it, here’s our application. They can quite quickly speak to government and come to an agreed
view.
‘It might not be the view that I like, but at least I know quite quickly what the regulatory and Island view is on ICOs or crypto-to-crypto exchanges or whatever it is. And that’s a tremendous advantage of somewhere like here.
‘I’ve no doubt that in due course the bigger jurisdictions will get up the knowledge curve. That’s inevitable. But in the interim we can steal a march and become a centre of excellence.’
Binance are planning on putting 30 to 40 people into their Jersey office, most of them trained locals: ‘So as an island we can become world leaders in crypto compliance, crypto regulation, the regulation of digital assets. That’s a tremendous place to be given all the external sovereign risk to other areas of our financial services industry. And with that comes all the other ancillary bits and pieces – people wanting to move here and set up digital asset businesses, an online business, a tech business. They don’t require reams and reams of office space. You can do all this stuff on a few laptops, but they are profit-generating businesses with proper substance and expertise and that’s a great thing for Jersey to have.’
Chris’s pipeline of work is pretty busy and he has set up an industry working group, the Digital Assets Working Group, so they can continue to engage with the regulator. ‘What I’ve realised is that there is this community in Jersey that has historically been very fringe, doing all sorts of great stuff.
‘There’s a company doing ICO coding here and there’s people doing AML/CFT service provision and it’s bringing that eco system together.’
So where does he see Jersey’s digital industry progressing?
‘I think you’ll see a continued growth in the local digital assets eco system, a growth in that community and that will become a self-fulfilling prophecy, because the more people who are here, the more people will come and the more locals will get trained up. A few more businesses will come to Jersey and we’ll shortly reach critical mass.’
