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Tiny UK island wants to take advantage of increasingly popular cryptocurrency

Located in the Channel Islands off the shore of France, the rocky Isle of Jersey has over the centuries been a pivotal province for English and French political ambitions. Measuring a mere 5 by 9 miles (45.5 sq. miles), the island was conquered by the Norman (located in modern France) count of Rouen, William Longsword in 933 AD.  Following his successor, Williams the Conqueror's conquest of England and the subsequent fallout with mainland France, Jersey remained a loosely controlled colony of England, or a "peculiar possession" of the English crown, as legal documents state.
 
I. Bitcoin -- a Backdoor to Tax Evasion by the Ultra-wealthy?
 
Today even as the island state grapples with issues of lack of transparency and allegations of playing a pivotal role in the manipulation of global finances, it is eyeing making the cryptocurrency Bitcoin a key pillar of the global economy. 

Jersey Location
Jersey is located off the coast of France's Normandy region. [Image Source: Wikimedia Commons]

To a cynic, the move could certainly be viewed as an effort to give the American, UK, and German banks that drive much of Jersey's bustling economy a new route to escape taxation.  
 
Jersey is financially independent from the rest of the UK and is not bound by many of the European Union's financial regulations.  It even has its own currency, albeit one which is founded on the strength of the British Pound.  This independence has made Jersey a leader among the Channel Islands in the growing game of global tax evasion, a game that is played both by large global corporations and large individual investors.

Jersey Isle
Jersey is increasingly both a tax haven and island playground for billionaires. [Image Source: Laundelles]

The island is estimated to shelter at least $250B USD in wealth, primarily from the U.S., but also from the UK and Germany -- two other top banking locations.  The Bitcoin has long been promoted as a route to denationalizing currency and freeing it from the risk of manipulation by bodies controlled by the banking industry, such as the U.S. Federal Reserve System.  But in an ironic twist, the same attributes that were supposed to offer greater global equity may be exploited as a pivotal tool of interests looking to promote inequity.
 
It is incorrect to say Bitcoins are "untraceable".  But compared to standard digital or ledger transactions, its record is somewhat obfuscated by cryptography making it ore difficult to trace.  That could make it a boon for banks like Morgan Stanley that shelter billions in the Isle of Jersey.

Bitcoin w/ U.S. Currency
Bitcoin could be a powerful tool for tax evasion. [Image Source: BitSquare]

In the U.S. most small businesses pay between 20 and 35 percent in corporate taxes.  But large banks have long indicated that they feel they should be entitled to be free from the burden of taxes.  Thanks to tax sheltering in small, loosely governed regions like Jersey, experts believe they frequently achieve tax rates in the low single digits.  This in turn gives the ultra-wealthy in America, Britain and other regions a crucial club to beat down meritocracy, breaking the free market and preserving old wealth.
 
II. Robbie Andrews, Jersey Bitcoin Evangelist
 
Sporting a Fu Manchu for "Movember" on his Vimeo photograph, Robbie Andrews looks like he could be at home in New York City's hipster communities.  But the young Jersey native -- who describes himself in his Vimeo profile as a motionographer for hire -- is acting as the unlikely evangelist in the movement to promote Bitcoin on the island.

Robbie Andrews
Jersey Bitcoin evangelist Robbie Andrews [Image Source: Vimeo]

He set up the site bit.coin.je and has been working with the weak Democratic local government to ensure the currency suffers no regulatory hurdles.  In a recent interview with BBC News he commented:

In the same way email changed how we send files globally, Bitcoin will change how we transact our lives. It is a network you can use for payment that is global and not managed by one industry body.

My plan would be that you get the bus and pay using your phone. You get the paper, you pay with your phone. And at no point do you constantly give people your credit card details.

[Next would come Bitcoin banking.]  That would require new legislation and the States need to act quickly if they want to capitalise on it.

At the moment there is a big push for a digital industry in Jersey to grow and if you asked any technologist what is the one technology that fits between technology and finance, it would be a crypto-currency like Bitcoin.

His plan for Bitcoins on his island home have drawn excitement, but some fear that he could offer a new set of backdoors for tax evasion on behalf of the island's powerful banking establishment, particularly when he mentions the possibility of Bitcoin banking on the Isle of Jersey.
 
III. At War With Its Own Elected Officials
 
An Oct. 2012 piece in Fortune proclaimed that Jersey was "The richest offshore tax shelter of them all."  The Channel Islands have garnered the name "The Treasure Islands" for their growing role in global tax evasion.  And while it has at least a guise of democracy -- with a Parliament -- it's faced increasing accusations of corruption and trampling of free speech rights as voter turnout has waned and influence of the international banking industry on the island's government has grown.
 
Even the country's own government are increasingly vocal about this disparate state of affairs.  Stuart Syvret -- a former Jersey parliamentarian -- has been subject to a "clandestine gag order", which aims to prevent his ongoing blogging on the tiny island's corrupt government and "secrecy culture".  Some other members of the island's current Parliament (MPs) are sympathetic to the former MP's cause.  Parliamentarians complain that the "Government of Jersey" -- a central state body -- acts on its own accord, often in secrecy, and is often at odds with the more Democratic Parliament.

Stuart Syrvet
Former Jersey MP Stuart Syvret has been targeted with an anti-free speech gag order for blogging about corruption in the Jersey state government. [Image Source: Philip Ide]

MP Trevor Martin wrote in a statement following the gag order against his former colleague:

This situation within our 'democracy' should outrage not only ordinary members of the Jersey public, but every journalist and broadcaster.  [The Jersey central government] squanders millions of pounds from the public purse to try to silence and discredit its critics.  On behalf of the people of Jersey, this is quite literally an S.O.S.

Nicholas Shaxon in 2011 published an entire best-selling book -- "Treasure Island" -- on the rampant and growing banking industry corruption on the isle.  He commented to Forbes in 2012:

[Recent events are] just the snout of a gigantic black iceberg of global corruption.

In the last year and a half, secrecy on the island has ramped up, as has condemnation of the Jersey government's actions.
 
IV. Central Government Gives the Bitcoin a Cheery Wink and Nod
 
But the highly secretive, heavily criticized central government of Jersey insists that it's acting in the island's interest, and there's no hidden agenda for its newfound support of the Bitcoin.  Treasury Minister Senator Philip Ozouf comments to BBC News:

Our infrastructure of world-class financial services and digital expertise gives us the tools to be an early leader in the field. Innovation will be central to Jersey's future prosperity.  We are keen to support local businesses by helping to create a well-regulated and responsive environment for investment in the sector.

Fiona Le Poidevin, Chief Executive of Guernsey Finance -- a local powerhouse which works with Morgan Stanley and others -- also voiced cautious support, remarking:

[Bitoin is] increasingly familiar, but it is still in its infancy and this brings with it both challenges and opportunities.

Giles Day, a local businessman whose Tiffin tearoom is a much-frequented establishment among wealthy UK and American bankers, cheered the Bitcoin's growing role, hinting at its "charge free" status, stating:

It is fast, reliable and a very secure payment method. It is the way of the future. It is what the digital and finance industry will be using and those two industries are key to Jersey.

With a credit card, we get charged and it takes a while to get the money. We get Bitcoins into our account straight away, without any charges.

His shop accepts Bitcoins as a form of payment and he's considering paying his teahouse workers in the digital currency.
 
V. Tool for Abuse?
 
The big question for Jersey is whether Bitcoins will truly be used as their initial proponents ostensibly intended -- as populist, free-spirited financial tools -- or whether they'll be abused by the Isle's deep-pocketed corrupt institutions.  With the hint of Jersey Bitcoin banks already floating about, all eyes should be watching to see whether Jersey becomes the first Bitcoin-backed tax haven.
 
Ultra-wealthy investors such as the Winklevoss twins and billionaire magnate Sir Richard Branson have bet big on Bitcoin.  The key question is why.

Winklevoss twins
The Winklevoss twins, Tyler Winklevoss (left) and Cameron Winklevoss (right), with friend Divya Narendra (center) are among Bitcoin's wealthy proponents. [Image Source: CotaBatoExchange]

There are certainly more innocent answers.  Much like Facebook, Inc. (FB) -- which the Winklevoss twins enjoyed a rocky history with -- Bitcoin owns an alluring brand of digital cachet that is difficult to forge or replicate.  Many would argue these wealthy interests are backing Bitcoin for the same reason as small investors have -- it's a tool with certain financial advantages and a cool one, to boot.
 
But others fear that the growing interest could be driven by a darker side.  Bitcoin is indeed very young.  And some fear that while early concerns have focused on abuses of Bitcoin's flaws for criminal enterprise, similar abuses could be conducted by established financial powers, without the fear of federal prosecution and media admonishment.
 
Could Jersey hold the key to such abuses?  Only time will tell.

Source: BBC News





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