London Summit 2018 Spotlight

Which Countries Should Blockchain Projects Set Up Shop In?

Following the new requirements from MasterCard and Visa, Tal Ron explores new forward-looking solutions

London Summit 2018 begins tonight with our Networking Blitz, and Finance Magnates is finalizing its interview series with some of the event’s leading executives and speakers. Our latest piece looks into the world of blockchain technology.

Indeed, Blockchain development remains a key challenge for both emerging and established firms, and the need for fintech knowledge and understanding doesn’t make things any easier. Is outsourcing across the globe a real silver bullet for reducing costs and should you open your own office, and where?

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Following the new landmark MasterCard and Visa new requirements, what solutions are there, moving forward? Tal Ron, Chairman, and CEO of Tal Ron, Drihem & Co dives in to give his perspective on what is in store for projects.

We recently reported that Master Card and Visa would soon restrict payment processing for ICOs and crypto firms. Can you elaborate on the situation as you know it?

MasterCard’s new requirements currently apply to Financial Institutions, businesses that disburse their own funds to their consumers or small business customers, Licensed Money Transmitters, and organizations which are not required to register as a licensed money transmitter.

Furthermore, MasterCard specifically added merchants involved in the following activities to its Business Risk Assessment and Mitigation (BRAM) program: Contracts for Difference (CFD), Foreign exchange (Forex) trading, Cryptocurrency options trading, Initial Coin Offerings (ICOs).

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This means that today, all merchants involved in the above-mentioned activities can no longer submit transactions via the MasterCard network without being legally authorized to do so in the jurisdictions where the cardholders reside.

In order to demonstrate such compliance, MasterCard requires all merchants to register with the MasterCard Registration Program (MRP)and demonstrate compliance with the newly introduced requirements. Failure to do so will lead to possible fines raised as a result of BRAM violations.

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In order to comply, the registration process requires each Merchant to provide (a) Evidence that you are legally authorized to perform the above-listed activities, including a copy of the Merchant’s license or a reasoned legal opinion from a local lawyer, accredited by IMGL and STEP, and (b) a certification of effective controls.

Moving to real regulators, which jurisdictions are considered popular today?

Some of the most popular jurisdictions nowadays include Estonia, Malta, and Singapore.

Are countries that aim to attract the blockchain or crypto industry (Estonia, Switzerland, Malta, Gibraltar, etc.) relevant to the financial services sector firms offering crypto trading?

Yes. While Gibraltar has lost some of its popularity due to the Brexit, some of the best locations to run crypto-related businesses are Estonia, Malta, and Switzerland. While Switzerland is seen as a “Cryptonation” and one of the top EEA countries to start a blockchain-related business, Estonia is one of the countries with the highest internet penetration rates in the world.

This includes an e-residency program and Bitcoin ATM’s since 2015, whereas Malta has become the first jurisdiction to adopt a regulatory framework on DLT, Blockchain, and Innovative Technology.

Indeed, on June 26, 2018, Malta took a new regulatory approach by evaluating the technology described in the white papers of operators interested in coming to Malta to launch ICOs.

This is a regulatory innovation in the crypto industry! Malta adopted three laws: the Malta Digital Innovation Authority Act, which establishes the Malta Digital Innovation Authority and certifies DLT platforms, the Innovative Technology Arrangements and Services Act, which concerns the setting up of exchanges and other companies operating in the cryptocurrency market, and the Virtual Financial Assets Act, which sets up the regulatory regime governing ICOs, cryptocurrency exchanges, and wallet providers.

The final choice is up to your personal preferences, business goals, and legal counseling, but all of the jurisdictions listed above also offer preferential tax programs and will help you set up a regulated crypto business according to your needs.

You are active in many industries. Do you have any lessons for the financial services and crypto sector from working with other types of merchants?

It is strongly advised for such firms to obtain sufficient legal advice, become fully compliant with regulators and local tax and AML authorities, and obtain required legal opinions, especially since Mastercard and Visa’s requirements will surely be adopted by other providers in the future.

Tal Ron will be speaking at the upcoming London Summit 2018, exploring life after the new regulations. The in-depth workshop will be held on November 14 from 10:00-10:30. Learn more and register here today!

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