Daniel Scott, Co-founder of CoinCorner, uses his experience to give an insightful assessment of the Bitcoin industry, and how to start up a company in an unregulated marketplace.
Starting a business in any industry is a big undertaking, and especially so when the industry is unregulated. Our company, CoinCorner, is a Bitcoin exchange based in the Isle of Man. We launched the business in 2014 and at a time when Bitcoin was relatively unknown to anyone outside cryptocurrency enthusiasts.
Bitcoin Industry Overview
The Bitcoin industry remains unregulated which means that Bitcoin isn’t governed by any authority or laws. Most of the major economies in the West are yet to introduce any specific laws around the cryptocurrency industry (this is possibly going to change in 2019), however, a number have issued warnings to consumers about the risk of initial coin offerings (ICOs) and cryptocurrency trading.
In the four years that have passed since the business began, we have experienced considerable startup turbulence, much of which has occurred as a result of the infancy of the industry. Without a doubt, dealing with what are essentially industry growing pains have made our business stronger and able to adapt quickly to change.
Introducing Best Practices
When we launched CoinCorner, we had regulation in mind as we knew it would come in to play at some point in the future. We made sure to follow best practices from day one, which meant that if and when regulation was finally brought in, we would not face the enormous task of having to go back and getting to know our customers.
Despite the overall regulatory landscape of the industry, our company actually falls under the supervision of the Isle of Man Financial Services Authority (IOMFSA) as a Designated Business; this means that we are required by law to comply with local “know-your-client” (KYC) and anti-money laundering (AML) procedures. We worked closely with our local government to introduce these measures in 2016. It continues to set us apart from other exchanges as a trustworthy business and has ensured that we are fully compliant with recognised financial procedures.
Helping To Draft Regulation
As mentioned previously, we have worked closely with the Isle of Man Government, as well as the Isle of Man Financial Services Authority, helping to educate them on what cryptocurrency is and how it works, and advising on the best way to approach drafting the regulatory guidelines for the cryptocurrency industry. Again, this has been an overhead (one that was particularly time-consuming), yet has been and continues to be hugely valuable in helping to bring in government oversight. Our help has ensured that the government is not only comfortable with Bitcoin, but is fully supportive and encouraging of local innovation in the industry.
Challenging Industry Issues
One significant impact of starting a business in an unregulated marketplace is that the industry is often viewed with much concern by the key players in the business community. For example, our business and other exchanges in the industry have experienced ongoing difficulties in securing business accounts with financial institutions. This has been especially difficult in the United Kingdom as the majority of banks have struggled to adapt to growing consumer and business interest in Bitcoin.
Creating Valuable Resources
Earlier this year, we launched a brand-new website, bitcoinregulation.world.
Having been operating in the crypto industry for a number of years, we have witnessed first-hand regulation come and go. Talks regarding regulation are happening daily and changing overnight so it can be hard to keep up, but at the moment, there is no uniform approach towards the regulation of Bitcoin, and its legality is decided on a country-by-country basis. However, as authorities around the world gain more experience and knowledge and ultimately grow more comfortable with Bitcoin and the cryptocurrency industry in general, it is likely that we will see certain minimum levels of regulation come into place in the vast majority of countries.
We created bitcoinregulation.world as an easy way to help find and understand the laws and regulations surrounding Bitcoin from different countries around the world and to help clarify Bitcoin regulations in response to growing public interest on the subject. The site comes as part of our drive to help better educate the public on the crypto industry, which we hope will drive global adoption and acceptance.
Effects On The Business
Although welcoming government/financial supervision and incorporating regulatory practices from the start has been hugely positive and beneficial to our business, it has meant that we have faced additional overheads (both financially and operationally) than new companies in regulated industries. These overheads were especially challenging to deal with when we were in the startup phase and operating on a shoestring budget. This is simply a situation we have had to deal with and give priority, with the understanding that earlier comprise will bring future benefits to the business.
As a result of continual banking restrictions, our business has had to seek alternative arrangements which includes banking in Europe rather than the UK. Despite the complications this has caused operationally, we have been able to develop solid relationships with financial institutions in other countries – something that is very advantageous to our business as it continues to grow and expand on a global scale.
Overall, as a former Startup in an unregulated marketplace, our experiences have been broad and full of opportunity. We have used the lack of regulation to our business’s advantage, embracing it where we can in multiple ways, from introducing and refining compliance policies to launching a regulatory website to help consumers and businesses. This has helped us to position ourselves as innovators operating at the forefront of the industry, ready for if and when cryptocurrency regulation is introduced.