Jersey has introduced legislation that regulates cryptocurrency exchanges with an annual turnover of £150,000 (approximately US$210,000) or more. These exchanges are supervised by the Jersey Financial Services Commission and must comply with anti-money laundering and counterterrorist financing laws, including know-your-customer requirements. By excluding exchanges with a turnover below £150,000, Jersey aims to create a means for companies to test various methods of financial technology without being subject to regulation.
Jersey is a Crown Dependency of the United Kingdom and is a low-tax jurisdiction with a large financial sector. The jurisdiction issued a consultation on the regulation of cryptocurrencies in 2015, noting “[t]he creation of a business-friendly framework that encourages innovation, jobs and growth in both the financial services and digital sectors is a priority for the Government of Jersey.” The majority response to the consultation was that cryptocurrencies should be regulated only insofar as necessary to ensure compliance with anti-money laundering laws and to counter the financing of terrorism. The government of Jersey rejected “a full prudential and conduct of business regime” for cryptocurrencies, as it considered it was too early to issue such regulations given that cryptocurrencies are in the early stages of development and that doing so could be over-burdensome, and restrict development and innovation.
II. Policy and Laws Regulating Cryptocurrencies
The result of the consultation was the issuance of a policy document that aims to
further enhance Jersey’s proposition as a world leading Fintech jurisdiction . . . [and] outline Jersey’s commitment to creating an environment that encourages confidence and innovation in the digital sector whilst protecting the Island from the most prominent money laundering and terrorist financing risks that are presented by virtual currencies in their current form.
Jersey’s anti-money laundering laws and counterterrorist financing laws were extended to cover cryptocurrencies, entering into force on September 26, 2016. “Virtual currencies” are defined in the Proceeds of Crime Act as a currency rather than a commodity, thus enabling the currency to fall within the pre-existing regulatory framework and be regulated by the Jersey Financial Services Commission. Specifically, the Proceeds of Crime Act defines virtual currency as
(4) . . . any currency which (whilst not itself being issued by, or legal tender in, any jurisdiction)–
(a) digitally represents value;
(b) is a unit of account;
(c) functions as a medium of exchange; and
(d) is capable of being digitally exchanged for money in any form.
(5) For the avoidance of doubt, virtual currency does not include any instrument which represents or stores (whether digitally or otherwise) value that can be used only to acquire goods and services in or on the premises of, or under a commercial agreement with, the issuer of the instrument.
A “virtual currency exchange” is defined in the Act as “ the exchange of virtual currency for money in any form, or vice versa,” but “a reference to providing a service to third parties shall not include a company’s providing that service to a connected company.”
Virtual currencies were also brought within the ambit of the Money Laundering (Jersey) Order 2008, which requires individuals operating a “money service business” to register with the Jersey Financial Services Commission and comply with the jurisdictions anti-money laundering and counter terrorism financing laws if they have an annual turnover greater than £150,000 (approximately US$210,000). These laws require such businesses to adopt policies and procedures to prevent and detect money laundering and terrorist financing, appoint a money laundering compliance officer and reporting officer, and ensure that record keeping and customer due diligence measures are implemented, such as know-your-customer measures, prior to entering into a business relationship with a person, or before conducting a “one-off” for all transactions greater than €1,000 (approximately US$1,220).
Individuals who operate a virtual currency exchange as a business but have an annual turnover of less than £150,000 are exempt from the Act. These businesses must notify the Jersey Financial Services Commission that they are conducting such a business, but that they are exempt. There is no fee for this notification, but it makes the business known to the Jersey Financial Services Commission and enables them to “build a good profile of the businesses in this sector” and to investigate the business for any suspected breaches of legislation. The aim of this exemption is to create “an innovative regulatory sandbox . . . allowing Exchangers with turnover of less than £150,000 per calendar year to test virtual currency exchange delivery mechanisms in a live environment without the normal registration requirements and associated costs.”
IV. High Value Dealers
Businesses that trade in goods and receive payments in cryptocurrency of €15,000 (approximately US$18,500) and above per transaction, or in groupings of transactions, are considered to be “high value dealers” under the Proceeds of Crime Act 1999. Such dealers must be registered and supervised by the Jersey Financial Services Commission and comply with Jersey’s money laundering and counterterrorist financing laws.
V. Distributed Ledger and Blockchain Technology
At the time of the consultation, the government considered the regulation of distributed ledger and blockchain technology, but determined that this area was evolving too quickly to regulate effectively. It opted to actively monitor these areas for development and consideration of regulation in the future.
Prepared by Clare Feikert-Ahalt
Senior Foreign Law Specialist
 Chief Minister’s Department, Regulation of Virtual Currency: Consultation Paper (July 9, 2015; presented to the States July 10, 2015), available at http://www.statesassembly.gov.je/assemblyreports/2015/r.80-2015.pdf, archived at https://perma.cc/K5PY-GZRP.
 Chief Minister’s Department, Regulation of Virtual Currency Policy Document ¶ 1.1(Oct. 21, 2015), available at https://www.gov.je/SiteCollectionDocuments/Government and administration/P Regulation of Virtual Currency 20151021 GP.PDF, archived at https://perma.cc/9QBL-YQNT.
 Id. ¶ 1.2.
 Id. at 2.
 Proceeds of Crime (Miscellaneous Amendments) (Jersey) Regulations 2016, R&O 63/2016, https://www.jersey law.je/laws/enacted/PDFs/RO-063-2016.pdf, archived at https://perma.cc/F2H5-2KNV; Proceeds of Crime (Supervisory Bodies) (Virtual Currency Exchange Business) (Exemption) (Jersey) Order 2016, Revised Laws of Jersey, https://www.jerseylaw.je/laws/revised/PDFs/08.785.80.pdf, archived at https://perma.cc/A8W9-7753.
 Proceeds of Crime Act 1999, Sched. 2, Part B, ¶ 9, https://www.jerseylaw.je/laws/revised/Pages/08.780.aspx#_ Toc468266188, archived at https://perma.cc/K2YU-7KA4.
 Id. Sched. 2, Part B, ¶¶ 4, 5.
 Id. Sched. 2, Part B, ¶ 9(2)(a)–(b).
 Money Laundering (Jersey) Order 2008, Revised Laws of Jersey, https://www.jerseylaw.je/laws/revised/Pages/ 08.780.30.aspx, archived at https://perma.cc/2ENA-U4AQ.
 Proceeds of Crime (Supervisory Bodies) (Jersey) Law 2008, Revised Laws of Jersey, https://www.jerseylaw. je/laws/revised/PDFs/08.785.pdf, archived at https://perma.cc/U5CQ-EQGY;
 Money Laundering (Jersey) Order 2008, Revised Laws of Jersey, https://www.jerseylaw.je/laws/revised/ Pages/08.780.30.aspx, archived at https://perma.cc/PT5L-A4X6.
 “Customer due diligence measures” are defined in the Proceeds of Crime Act 1999, Sched. 2, Part B, ¶ 3.
 Chief Minister’s Department, Regulation of Virtual Currency Policy Document, supra note 2, ¶ 1.14. See also Money Laundering (Jersey) Order 2008, Revised Laws of Jersey, https://www.jerseylaw.je/laws/revised/ Pages/08.780.30.aspx, archived at https://perma.cc/5QDP-PE8Y.
 Proceeds of Crime (Supervisory Bodies) (Virtual Currency Exchange Business) (Exemption) (Jersey) Order 2016, Revised Laws of Jersey, https://www.jerseylaw.je/laws/revised/PDFs/08.785.80.pdf, archived at https://perma.cc/A8W9-7753; see also Jersey Strengthens Financial Crime Regulation with Extension to Cover Virtual Currency, Jersey Finance (Oct. 24, 2016), https://www.jerseyfinance.je/news/jersey-strengthens-financial-crime-regulation-with-extension-to-cover-virtual-currency#.WrI4_v6os5s, archived at https://perma.cc/TX8J-KE5R.
 Chief Minister’s Department, Regulation of Virtual Currency Policy Document, supra note 2, ¶ 1.8.
 Virtual Currency Regulation in Jersey Takes Effect, Ogier (Oct. 4, 2016), http://www.ogier.com/publications/ virtual-currency-regulation-in-jersey-takes-effect, archived at https://perma.cc/AHT8-HJBZ.
 Proceeds of Crime Act 1999, Sched. 2, Part B, ¶ 4.
 Id.; AML/CFT Handbook for Estate Agents and High Value Dealers, Jersey Financial Services Commission, https://www.jerseyfsc.org/pdf/Consolidated-Estate-Agents-and-HVD-Section-1-to-10.pdf (last visited Mar. 21, 2018), archived at https://perma.cc/H5CA-UEGK.
 Chief Minister’s Department, Regulation of Virtual Currency Policy Document, supra note 2, ¶ 1.34.
 Id. ¶ 1.36.
Last Updated: 06/20/2018