The recent market crash has made it difficult for the financial industry to trade Bitcoin. However, the Channel Islands, a small group of British Overseas Territories, are offering tax incentives to help investors move their money into cryptocurrency.
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.
In the UK, Crypto experts are based Jersey and Guernsey recently spoke with Business Insider media to discuss how the islands have set up efforts to attract cryptocurrency and blockchain investors.
Insider was told by Edmund Hatton (a digital tech lead at Digital Jersey) that these islands do not have inheritance or capital gains tax. This makes them attractive for crypto and other investment firms.
Hatton claimed that Jersey and Guernsey competed for cryptocurrency even before it was mainstream.
Jersey has attracted crypto-firms such as CoinShares that manage assets worth approximately $3 billion. Jersey was the location used by Swiss-digital-asset investment firm, CoinShares, to launch 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 directly competing with Cayman, but we’re also seeing the flow of US funds out. Lewis explained that South American and Brazilian investors are no longer in love with Cayman. They have moved the capital to Guernsey.
The Channel Islands’ attempts to attract crypto investors coincided with the sharp plunge in crypto prices in the nine previous months.
Current crypto winter could be a positive for the landscape by consolidating major companies, testing key infrastructure and increasing efficiency.
Jonathan Van Neste is a partner at Jersey’s Oben Regulatory. He told Insider that he could see a consolidation in crypto projects during a crypto winter. This would make it easier to invest in the crypto, blockchain and DLT spaces.
According to experts, the maturation and growth of digital assets could increase investors’ desire for low-tax jurisdictions like Jersey or Guernsey.
The experts believe that Guernsey will benefit from cryptocurrencies’ return by virtue of Jersey and Guernsey’s proactive approach to luring potential investors.
Lewis stated that although crypto and digital asset adoption was slow in the space of the fund, Lewis believes we are well-positioned for the next cycle.
Residents of Guernsey, Jersey, and Guernsey are showing the same interest in cryptocurrency as counterparts in the UK.
One in five Guernsey residents owns cryptocurrency, according to reports. The islands’ younger residents are more likely to use digital assets such Bitcoin for online transactions.
The UK’s next generation has adopted crypto assets and is using them despite warnings from regulators.
People have adopted virtual assets in countries around the world that have experienced currency devaluation because of inflation.
Guernsey created its first cryptocurrency fund in January 2017. It is now open to institutional investors.