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General climate and trends

General innovation climate

What is the general state of fintech innovation in your jurisdiction, including any notable trends, innovations, innovators and future prospects?

Jersey's success as an international finance centre is the direct result of its consistent ability to nurture innovation. Arguably the most important factors behind Jersey's growing ability to attract fintech businesses have been the dynamic, forward-thinking approach of the Jersey Financial Services Commission (JFSC) and the pro-business attitude of Jersey's government, the States of Jersey.

Digital Policy Framework

Jersey's Digital Policy Framework sets out six key objectives for Jersey's digital policy:

  • a thriving digital sector;
  • digital skills for all;
  • advanced digital infrastructure;
  • government digital transformation;
  • robust cybersecurity; and
  • secure data protection.

Digital Jersey

A digital accelerator, Digital Jersey, was established in 2013 as the principal driver of government efforts to establish Jersey as an internationally recognised centre for digital industries. Digital Jersey is working alongside the government, the private sector and Jersey Finance (the Jersey finance sector's industry body) on a number of key initiatives, one of which is fintech.

Digital Jersey has identified the following benefits for businesses looking to develop their fintech proposition in Jersey:

  • a well-established financial services sector;
  • investment in fibre connectivity and an extensive telecoms network;
  • close proximity to customers of financial institutions and supporting industries, as well as a close network of key individuals;
  • the reputational and marketing advantage of developing bespoke financial solutions in a highly regarded and well-regulated international financial centre;
  • ready availability of key financial services industry skills and expertise with more than 13,000 finance industry professionals; and
  • a pro-business government, independent regulator and robust regulatory regime.

Digital Jersey brings together individuals from the finance and digital sectors to foster open dialogue about the future of financial services. This aims to encourage the development of new fintech innovations and enterprises. Digital Jersey's work is supported by Jersey Finance through proposition development groups, joint events and market ventures.

Digital Jersey's 2018 priorities

Digital Jersey's stated priorities for 2018 include:

  • ensuring that Jersey has the right environment for all digital businesses to set up, including the availability of business and staff licences (which are required to enable non-Jersey residents to work and reside in Jersey), supportive government policies and funding;
  • continuing to develop digital skills and working with partners to grow career opportunities, including prioritising digital skills development within financial services; and
  • creating a fintech sandbox for Jersey with the JFSC.

Key technologies

Have there been any particular developments – regulatory or commercial – in any of the following fintech sectors?

Distributed ledger technology and digital currencies (eg, blockchain, smart contracts and Bitcoin)?

The world’s first regulated bitcoin investment fund, Global Advisors Investment Fund plc, was launched in Jersey in 2014. Its admission to the official list of The International Stock Exchange (formerly the Channel Islands Securities Exchange) in December 2016 meant that it was the first regulated bitcoin fund to be listed on any exchange globally.

Alternative lending platforms?

Alternative lending platforms are not applicable at this stage.

Digital payments, remittances and foreign exchange?

Jersey was one of the first jurisdictions to adopt a regulatory regime for virtual currencies. The regulation exempts start-ups involved in virtual currency exchange from paying fees to the JFSC for regulation, until they reach a turnover threshold of £150,000 per annum. While these businesses must still register with the JFSC and comply with Jersey's anti-money laundering legislation, innovation within these parameters is facilitated with reduced regulatory costs.

Alternative financing (including crowdfunding)?

ICOs Jersey's first initial coin offering (ICO) was launched in December 2017 by ARC Fiduciary Ltd. ARC created its own ‘ARC coins’ on the Ethereum Blockchain, with the objective of enabling coinholders to purchase a cryptocurrency designed to operate as a ‘stablecoin’ (ie, an effective ‘store of value’ and ‘unit of measure’). ARC's stated rationale for the ICO was to crowdfund a method of minimising volatility associated with a digital currency, without the need for the currency to be exchangeable with, or create an interest in, an underlying asset.

JFSC on crowdfunding

In May 2016 the JFSC issued FAQs in relation to crowdfunding, which confirmed that, in most cases, crowdfunding would not be regulated by the JFSC. However, this is a fast-moving industry and individual circumstances may produce different outcomes.

Investment, asset and wealth management?

Not applicable.

Robo-advice and artificial intelligence?

Artificial intelligence retreat

Jersey's first artificial intelligence retreat took place in September 2017, which showcased Jersey as a test bed.

Jersey eVID

Jersey eVID is a project to enhance customer on-boarding through the intelligent use of technology based on the adoption of a centralised database where ID information is submitted, verified, maintained and stored. With the user’s permission, the information can be shared with financial and professional services firms to fulfil specific elements of customer due diligence requirements.

Any other technologies?

The Gigabit Jersey project is bringing fibre connectivity to every island home and business, transforming Jersey and providing businesses with the ideal test environment for high-bandwidth services.

Regulatory issues

Regulatory approach

How would you describe the regulatory policy for fintech products and services in your jurisdiction?

The Jersey Financial Services Commission (JFSC) encourages innovation in the financial services industry by:

  • helping innovative businesses to understand how the regulatory framework applies to them and their proposed products and services;
  • listening to and engaging with industry and considering relevant policy where appropriate to foster the development of innovative products or services;
  • working to ensure a technologically neutral regulatory regime wherever possible; and
  • working closely with key stakeholders, including the States of Jersey, industry bodies and international standard setters to ensure that Jersey is well placed to respond quickly to new innovations in financial services.

The JFSC actively monitors fintech developments and potential regulatory implications. Some examples of the JFSC's work on fintech include:

  • working with the States of Jersey on the regulation of virtual currencies;
  • updating its Anti-money Laundering and Countering the Financing of Terrorism Handbook to provide further guidance to firms looking to use digital systems to satisfy certain customer identification requirements; and
  • issuing FAQs on crowdfunding.

Have any fintech-specific laws or regulations been enacted in your jurisdiction? Are any envisaged?

Jersey was one of the first jurisdictions to adopt a regulatory regime for virtual currency. The regulation exempts start-ups involved in virtual currency exchange from paying fees to the JFSC for regulation, until they reach a turnover threshold of £150,000 per annum. While these businesses must still register with the JFSC and comply with Jersey's anti-money laundering legislation, innovation within these parameters is facilitated with reduced regulatory costs.

Further legislation may be introduced as fintech industries mature and evolve (eg, in relation to ICOs).

Regulatory authorities

Which government authorities regulate the provision of fintech products and services?

The JFSC regulates financial services, including (to the extent regulated) fintech.

Other government bodies such as the Jersey Population Office regulate related matters including immigration and business licensing.

Financial regulatory framework

Which laws and regulations governing the provision of financial services apply to fintech businesses?

The legislation and codes of practice that govern the traditional financial services industry include:

  • the Financial Services (Jersey) Law 1998, which regulates and controls entities undertaking financial services business on or from the Island;
  • the mandatory codes of practice published by the JFSC pursuant to its powers under the Financial Services (Jersey) Law 1998;
  • the Proceeds of Crime (Jersey) Law 1999, the Proceeds of Crime (Supervisory Bodies) (Jersey) Law 2008, the Money Laundering Order 2008, the Community Provisions (Wire Transfers) (Jersey) Regulations 2007 and other related subordinate legislation thereunder (together, the Anti-money Laundering Legislation); and
  • the Anti-money Laundering and Countering the Financing of Terrorism Handbook produced by the JFSC to outline the requirements of Jersey legislation and the JFSC in relation to money laundering.

The extent to which these apply to fintech businesses in any given case will depend on the nature of the business and the way in which any particular fintech product or service is structured and delivered.

Under what conditions are fintech businesses subject to licensing requirements? Are there any exemptions?

The extent to which fintech businesses are subject to licensing requirements depends on the nature of the business and the way in which any particular fintech product or service is structured and delivered.

Jersey has adopted a regulatory regime for virtual currency which exempts start-ups involved in virtual currency exchange from paying fees to the JFSC for regulation, until they reach a turnover threshold of £150,000 per annum. While these businesses must still register with the JFSC and comply with Jersey's anti-money laundering legislation, innovation within these parameters is facilitated with reduced regulatory costs.

A new sandbox is proposed for fintech business more widely, but the exact parameters are not yet known.

Are any fintech products or services prohibited in your jurisdiction?

Any fintech product or service falling within the ambit of the existing legislation would be prohibited if it does not comply with the applicable regulatory framework.

Although the JFSC issued a risk warning in November 2017 in relation to ICOs, Jersey's first ICO has since been launched.

Data protection and cybersecurity

What rules and regulations govern the processing and transfer (domestic and cross-border) of data relating to fintech products and services?

Jersey's data protection legislation will be updated in May 2018 to bring it in line with the EU General Data Protection Regulation (GDPR). This local legislation will apply to all Jersey businesses, including fintech businesses, and is expected to include provisions relating to the processing and transfer of data consistent with the GDPR.

What cybersecurity regulations or standards apply to fintech businesses?

JFSC codes of practice

The JFSC's codes of practice (applicable to businesses that are regulated by the JFSC) cover operational risks which include cybersecurity. The JFSC expects all regulated businesses to take appropriate steps to properly manage their cybersecurity arrangements. Therefore, to the extent that fintech businesses are regulated by the JFSC, these codes of practice will apply.

Data protection

More generally, Jersey's data protection legislation, which will be updated in May 2018 in line with the GDPR, regulates the processing and protection of personal data and requires businesses to put in place technical and organisational measures to protect data.

Channel Islands Information Security Forum

The Channel Islands Information Security Forum has been established as the association for cybersecurity policy and education in Jersey and Guernsey. It has a public awareness programme aimed at the public, educators, policymakers, business and community leaders and professionals. It also delivers and facilitates training for security professionals and seeks to establish the Channel Islands as centres of excellence in cybersecurity.

Financial crime

What anti-fraud, anti-money laundering or other financial crime regulations govern the provision of fintech products and services?

The legislation and codes of practice that govern the traditional financial services industry include:

  • the Financial Services (Jersey) Law 1998, which regulates and controls entities undertaking financial services business on or from the Island;
  • the mandatory codes of practice published by the JFSC pursuant to its powers under the Financial Services (Jersey) Law 1998;
  • the Proceeds of Crime (Jersey) Law 1999, the Proceeds of Crime (Supervisory Bodies) (Jersey) Law 2008, the Money Laundering Order 2008, the Community Provisions (Wire Transfers) (Jersey) Regulations 2007 and other related subordinate legislation thereunder (together, the Anti-money Laundering Legislation); and
  • the Anti-money Laundering and Countering the Financing of Terrorism Handbook produced by the JFSC to outline the requirements of Jersey legislation and the JFSC in relation to money laundering.

The extent to which these apply to fintech businesses in any given case will depend on the nature of the business and the way in which any particular fintech product or service is structured and delivered.

What precautions should fintech businesses take to ensure compliance with these provisions?

Fintech businesses are encouraged to discuss their proposals with the JFSC and specialist legal counsel in Jersey so that the applicable requirements are fully understood and appropriate measures can be put in place to ensure compliance.

Consumer protection

What consumer protection laws and regulations apply to the provision of fintech products and services?

Complaints can be made to the Channel Islands Financial Ombudsman to the extent that the products or services being provided fall within any of the following areas of financial services:

  • banking;
  • lending;
  • money services;
  • insurance;
  • pensions; and
  • investments.

More generally, draft consumer protection legislation has been adopted by the States of Jersey, which is based on the Unfair Commercial Practices Directive 2005. This legislation is subject to sanction by Order of Her Majesty in Council and, once implemented, will apply to all Jersey businesses which deal with consumers.

Additionally, the Distance Selling (Jersey) Law 2007 and the Supply of Goods and Services (Jersey) Law 2009 apply for the protection of consumers.

Competition

Does the provision of fintech products or services in your jurisdiction raise any particular competition regulatory concerns?

The Competition (Jersey) Law 2005 implemented a merger control regime in Jersey and restricted anti-competitive practices and the abuse of a dominant position. This law applies to all businesses operating in Jersey, including fintech businesses.

Cross-border regulation

Are there any particular regulatory issues concerning the cross-border provision of fintech products and services (eg, operating jurisdiction rules and currency controls)?

The GDPR and the equivalent local data protection legislation to be introduced in Jersey will regulate the cross-border transfer of data.

Financing, investment and government support

Government support

Does the government provide any incentives or support programmes to promote fintech innovation in your jurisdiction (eg, tax incentives, grants and regulatory sandboxes)?

Jersey has adopted a regulatory regime for virtual currency which exempts start-ups involved in virtual currency exchange from paying fees to the Jersey Financial Services Commission (JFSC) for regulation, until they reach a turnover threshold of £150,000 per annum. While these businesses must still register with the JFSC and comply with Jersey's anti-money laundering legislation, innovation within these parameters is facilitated with reduced regulatory costs.

A new sandbox is proposed for fintech business more widely, but the exact parameters are not yet known.

Digital Jersey runs a work permission scheme aimed at bridging the talent gap for the skills that are most needed to support Jersey's digital economy. These skills may be technical or business-related, but must be growth enablers to talent-starved businesses. Working permissions are targeted at roles that will contribute towards the growth and development of the local digital sector, but most importantly those skills that are otherwise unavailable in the local talent pool. Digital Jersey's evaluation of applications is based on business growth and training, candidate skills, availability of skills locally, productivity and innovation.

Digital Jersey also runs the Start-up Jersey initiative for entrepreneurs within the European Economic Area (EEA). Up to two EEA citizens can submit a business plan to Digital Jersey and, if the plan is approved, both individuals will be issued with housing and working rights in Jersey. The enterprise must be engaged in research, development and innovation and must be early seed, pre-launch, pre-revenue, newly incorporated or operating for less than two years, or early stage (operating between two and three years) with fast growth potential. Salary or dividends of less than £65,000 per full-time equivalent per annum (or no previously distributed profits) is also a requirement.

Digital Jersey has also set up a hub in Jersey which provides a co-working space and tools for young businesses to grow and develop their ideas. This is used by many different businesses, from small fintech start-ups to more established digital firms.

The Jersey Innovation Fund (which is under review) may potentially be available to provide working capital to entrepreneurs, start-ups and established organisations that want to bring new and innovative products or services to the market.

Has the government concluded any international cooperation agreements to promote and facilitate the cross-border expansion of fintech businesses?

Not applicable.

Financing and investment

What private financing and investment schemes are available and commonly used for fintech start-ups in your jurisdiction?

Private financing and investment may be available from local angel investors and high-net-worth individuals.

Ancillary issues

IP rights

What forms of IP protection are available for fintech innovations?

Jersey's legislation for the protection of copyright and other unregistered IP rights was updated in 2011. The laws making provision for IP rights that arise as a result of registration (eg, trademarks, patents and registered designs) provide for the re-registration in Jersey of intellectual property first registered in the United Kingdom.

What rules govern the ownership of IP rights to fintech innovations?

Jersey's legislation for the protection of copyright and other unregistered IP rights was updated in 2011. The laws making provision for IP rights that arise as a result of registration (eg, trademarks, patents and registered designs) provide for the re-registration in Jersey of IP first registered in the United Kingdom.

Immigration

What immigration schemes are available for fintech businesses to recruit skilled staff from abroad? Are there any special regimes specific to the tech or financial sector?

Digital Jersey runs a work permission scheme aimed at bridging the talent gap for the skills that are most needed to support Jersey's digital economy. These skills may be technical or business-related, but must be growth enablers to talent starved businesses. Working permissions are targeted at roles that will contribute towards the growth and development of the local digital sector, but most importantly those skills that are otherwise unavailable in the local talent pool. Digital Jersey's evaluation of applications is based on business growth and training, candidate skills, availability of skills locally, productivity and innovation.

What immigration schemes are available for foreign investors and entrepreneurs wishing to invest in or establish a fintech business in your jurisdiction?

Digital Jersey runs the Start-up Jersey initiative for entrepreneurs within the European Economic Area (EEA). Up to two EEA citizens can submit a business plan to Digital Jersey and, if the plan is approved, both individuals will be issued with housing and working rights in Jersey. The enterprise must be engaged in research, development and innovation and must be early seed, pre-launch, pre-revenue, newly incorporated or operating for less than two years, or early stage (operating between two and three years) with fast growth potential. Salary or dividends of less than £65,000 per full-time equivalent per annum (or no previously distributed profits) is also a requirement.

More generally, there is a special and beneficial tax regime for high-net-worth individuals wishing to immigrate to Jersey.

The States of Jersey has set up a resource centre, Locate Jersey, for those interested in relocating to the island.