As a member of the Global Financial Innovation Network (GFiN), the IOMFSA is sharpening its focus on innovation and dynamic regulation.
The new innovation hub on the IOMFSA website offers guidance to businesses seeking authorisation under the Financial Services Act 2008 and/or the Insurance Act 2008 using innovative technology in delivering regulated activities.
A regulatory sandbox is now available, allowing financial services products to be tested in a controlled environment with reduced risks to consumers. A restricted licence with conditions may be issued to a business still at beta testing stage, and requirements of the Financial Services Rule Book waived or modified until testing has been completed and the business is fully compliant and ready to launch.
Plans for an Innovation Challenge have also been announced. The collaboration between the IOMFSA and the Finance and Digital agencies of the Isle of Man Department for Enterprise will invite businesses to develop creative, sustainable and technology-based solutions to a current issue in the financial services industry, with the winning applicant receiving support in taking their proposition to market using the regulatory sandbox.
Regulation of crypto-assets
The Isle of Man was a fast mover to bring crypto-asset businesses within the folds of AML/CFT regulation, introducing compliance requirements in 2015 and a registration regime under the Designated Businesses (Registration and Oversight) Act 2015 (DBROA) for businesses carrying out any “convertible virtual currency activity”.
Where a crypto-asset is analogous to a security or e-money, a business may need to be licensed under the Financial Services Act 2008, while businesses conducting online gambling are regulated by the Isle of Man Gambling Supervision Commission. However, for other crypto-asset businesses, registration under DBROA is not full regulation – there are no protections for consumers, no capital or liquidity requirements and no conduct of business rules beyond AML/CFT compliance.
A request for input on ‘Innovation and the Regulatory Perimeter’ has now been issued by the IOMFSA to open a dialogue with stakeholders around the existing approach and the potential implications of broadening the regulatory perimeter. The document raises some of the pros and cons of full regulation, including the cost of compliance to businesses and the cost of implementing and policing a regulation regime.
Responses will inform discussions around whether certain activities are brought within the Isle of Man’s regulatory perimeter. The closing date for submissions is 18 April 2022.