When we hear of new crypto and blockchain startups, we are used to hearing that they are based in locations such as Singapore or Malta- but now, as the popularity of the industry grows, other jurisdictions are coming into play.
As governments scramble to legislate the burgeoning industry, they also want to ensure that their laws are flexible enough to accomodate the potential that the industry holds. Whilst some tighten their grip, others have adopted a slightly more laissez-faire attitude.
Central American and the Caribbean poses an interesting alternative to those looking to set up a crypto business. Dapplife.com caught up with Ron Mendelson who is an advisor for crypto businesses looking to set up in Central America or the EU, to find out more.
Talk us through the crypto landscape in Central America?
There has been a huge focus on the EU and EEA crypto and blockchain industry as we have seen a number of countries like Malta, France, Switzerland introduce crypto-friendly legislation. But whilst this has all been going on, very interesting things have been developing on the other side of the Atlantic as well. Costa Rica in particular is emerging as a popular new jurisdiction to set up a business as the government are very open to the idea of it all. It is actually one of the few countries in the world where you can get your salary in cryptocurrency, and you will find a pretty high adoption rate here with many merchants accepting crypto as well as fiat currency.
In terms of regulation, it has quite a “hands off” environment which is particularly good for start ups that are trying to find their niche, but there are other options if you head towards the Caribbean. Jurisdictions such as Antigua, BVI and Cayman Islands are all well known for their corporate services industry, but they are also equally viable for crypto and blockchain as well.
As for North America, things are a lot more complicated and to be honest I don’t think the authorities there really understand what they are dealing with. Lack of regulation, regulation that doesn’t understand what crypto is about, and changes in regulations that leave some operators stranded- it will take time for things to stabilise there before it becomes a truly viable option.
How do these jurisdictions compare to Europe?
Doing business in Europe is a lot more formal and strict. Regulations are tight and prone to change and whilst much uncertainty has been removed, operators are still treading carefully. Malta is a popular choice for setting up a crypto or blockchain business in Europe, but I would advise most start-ups to do a ‘trial run’ in less rigorous jurisdictions first to get a feel for the success of their product first. This is due to the fact that non-EU jurisdictions have much lower start up costs, it is a lot less formal and there are lower tax and administration rates. Then when the concept has prove itself, they can migrate to EU jurisdictions.
Another EU jurisdiction I will be keeping my eye on is France who have recently announced that French banks are obliged to give an account to crypto and blockchain businesses, as long as they are registered- this is great news for EU operators who have previously found it very hard to get the banks on their side.
In fact, I think traditional banks are presenting more of an issue for crypto than any other issue in the industry. Of course, they are opposed to the possible competition that cryptocurrency presents and many have taken to blacklisting businesses that are involved in crypto in any way. Ultimately, this will do them a huge disservice because I see many ways that the two industries could be mutually beneficial.
Those that adapt and evolve will reap the rewards, those that do not will be left behind.
How do you think governments can better support the sector?
Whilst I am in favour of regulation and supervision in the industry, sometimes I cannot help but wish that governments would just get out of the way! Many of the issues that present themselves with crypto, such as money laundering and fraud, also present themselves with fiat currency and have done so for centuries. This is not a reason to be scared of the industry or to outlaw it.
I think maintaining reasonable preventions and policies in place can solidify the integrity industry and make it more difficult for those who would abuse Crypto to do so. This when done in a balanced manner, benefits everyone.
What happened to ICOs?
One of the problems with ICOs is many times there are, for lack of a better choice of term ‘scams’ as there is not always an underlying utility or purpose which will justify the growth and profitability. Some simply add the words ‘crypto’ or ‘bitcoin’ or ‘blockchain’ and lure in unsuspecting investors eager to ride the wave of growth we saw with Bitcoin (BTC) As the market matures, which it has, people see through these and become more educated as to what they should look for in an offering.
I am seeing a lot of interest around Security Token Offerings (STOs) at the moment- securities are often highly regulated so offering an STO means that there is much more adherence to rules, regulations, and strict requirements.
What advice would you give to someone looking start a crypto or blockchain business?
Crypto and blockchain are going to continue growing exponentially and we will continue to see much more adoption from big banks, international companies, and even governmental departments. The key to success in this growing and increasingly more competitive industry is working with integrity and choosing to partner with people who want to play by the rules.