Bitcoin Crypto Markets May Be Global, But Are They Offshore? There’s No Escaping From Law
Crypto Companies Offshoring Is No Escape From Law
Despite cryptocurrency’s decline in price, there does not seem to be any changes concerning governments’ efforts to establish a regulatory framework for the industry. Many see regulation as the key to ensuring industry growth and to protect customers.
Some cryptocurrency firms are interested in regulation as well. For instance, regulatory organization CryptoUK has reported that it would like more regulation. Indeed, even Ripple’s Ryan Zagone commented that it is important to find a balance between “capturing risk and enabling innovation.” He added, “We’re at a time now where we need more clarity and rules and we need more certainty.”
Of course, there are those who are opposed to regulation.
Akin Fernandez of Azteco reported to Finance Magazine,
“The idea that a ‘proper regulatory environment’ is required for the software industry to flourish is absolutely false and The world Wide Web on the Internet grew without any regulation at all, and the same thing will happen with Bitcoin, which is nothing more than a new database and communication protocol.”
Essentially, Hernandez takes the position that the solution is for cryptocurrency companies to find and establish themselves in jurisdictions that with less regulation and he pointed to BitMEX as an example. He mentioned,
“Companies will select free market territories like Hong Kong to incorporate in, just as BitMEX has. BitMEX is the extremely innovative and hugely profitable world-beating service that has just moved into two floors of the most expensive office space in the world they serve users all over the world and are not under any special regulation.”
Fernandez is not the only one who believes in such an approach. For instance, Bharath Rao of Leverj interviewed with Finance Magazine as well and stated that competitors who go to unregulated markets are bound to make more profit. At the end of the day, it is much easier to deal with jurisdictions that are free from regulatory approval, which can take time, money, and delay a company’s performance and growth.
The next question that arises is whether it is even feasible for companies to establish themselves in unregulated markets, but to still access customers in regulated jurisdictions. According to Jim Angleton of Aegis FinServ Corp, the answer is in the negative. He stated, “Many who have subscribed to this theory only get into trouble on the receiving end of law enforcement, regulatory, and central banker issues.” He added, “Even if you locate outside of the US, if you live in this country you have jurisdictional issues to overcome and are still liable for all actions. In fact you might be compounding your problems by the addition of the host country you operate within.”
At this point, it is important for cryptocurrency companies to realize that moving overseas, but catering to companies in jurisdictions with regulations may not be the best approach. By acting in a certain jurisdiction, they avail themselves to the laws of that jurisdiction and must still comply with the regulations that are in place.