BTSE leaves Dubai for British Virgin Islands: Why crypto businesses still haven’t found their regulatory utopia
Crypto exchange BTSE has shifted its operations out of Dubai, claiming that regulators in countries with “non-permissive legal systems” are holding back the mass adoption of cryptocurrency with their inaction and broken promises.
Crypto exchange BTSE has shifted its operations out of Dubai, claiming that regulators in countries with “non-permissive legal systems” are holding back the mass adoption of cryptocurrency with their inaction and broken promises. The move comes as the latest in a global game of musical chairs by crypto businesses, who have little choice but to relocate in the face of regulatory uncertainty.
The spot, futures, and fiat-crypto/crypto-fiat exchange have now joined Tether, Bitfinex, and other firms headquartered in the British Virgin Islands (BVI), on account of BVI’s having a “permissive legal system” that is “more welcoming to innovation,” BTSE Co-Founder Jonathan Leong told CryptoSlate. He elaborated:
“Regulatory uncertainty is holding back cryptocurrency progress in countries with non-permissive legal systems. Exchanges have to plan ahead and it’s pretty difficult when a jurisdiction has unclear rules and regulations. Malta, for example, made a lot of promises and in the end their framework was very narrow and not particularly useful. These are the greatest barriers to more infrastructure being built to support and encourage long-term mass adoption of crypto.”
A post on the BTSE blog said the exchange had endured nearly two years of regulatory uncertainty in Dubai before the decision was made to pull the plug, after regulators failed to deliver on a long-promised legislative framework for cryptocurrencies (a framework that had originally enticed the startup to set up shop in the UAE in March 2018). The exchange has been “gradually transitioning” to the BVI since October 2019.
Regulators failing to deliver the goods
Leong said exchanges could not plan ahead in jurisdictions with “unclear rules and regulations,” and pointed to Malta — widely held up as one of the world’s most progressive regulatory regimes for blockchain and crypto—as an example of a place that had “made a lot of promises” but ultimately failed to deliver. The BTSE blog post stated:
“As many in the cryptocurrency space are well aware, crypto regulations are far from stable and often very uncertain, even when regulations in a region have already been formed. Malta presents an example of a country that was once hailed as a new crypto haven, but has made little regulatory progress.”
The tiny island nation began championing itself in 2018 as “The Blockchain Island” after passing a set of bills regulating cryptocurrencies and the companies that deal in them and attracting two of the world’s largest crypto exchanges by daily volume, Binance, and OKEx, into setting up their operational bases in Malta. By early 2019, exchanges based in Malta accounted for the majority of crypto trading volume globally.
But despite the Maltese government’s beckoning stance as a crypto utopia, there have been signs that crypto businesses are facing a different reality down on the ground.
In March last year “dozens” of crypto firms told the Times of Malta that they had been unable to open bank accounts on the Mediterranean island after having shifted operations there, with banks explaining that cryptocurrency was outside their “risk appetite.”
Then in August, Zebpay, one of India’s top crypto exchanges, allegedly shuttered its Malta headquarters just 11 months after having shifted to the Mediterranean island and moved operations to Singapore.
Shortly after in October, another exchange, Bittrex, announced it would be moving its headquarters from Malta to Liechtenstein. While no official explanation was given, the move came just weeks after the Malta Financial Services Authority (MFSA) said it would start actively monitoring crypto exchanges for anti-money laundering (AML), and days after Bittrex suspended operations for customers based in 31 countries, many of which are deemed high-risk by the intergovernmental Financial Action Task Force (FATF).
The MFSA would look to have its hands tied with the broader AML crackdown on crypto seen in financial strongholds like the U.S. and U.K., however, highlighting a sobering reality: we are still waiting for a progressive and conclusive directive on cryptocurrency from a major power.