Why Small Jurisdictions are Winning the Cryptocurrency Race


By Bill Taylor/Contributor

Everyone is well aware of the term “too big to fail” which came out of the financial crisis, a touch over ten years ago. The term meant a company or institution deemed to be critical (too big) to the economy would need to be “bailed out” by the government (or a central bank).

But how about “TOO BIG TO INNOVATE?” That term could certainly be applied to countries (or the EU) that have layers of regulations, bureaucracies and conflicts of interest (power and control) that inhibit innovation. That is a huge problem in the rapidly (understatement) changing world of financial technology and especially cryptocurrencies (bitcoin, etc). Countries such as the United States, China, etc. are being “out-innovated” by smaller, more nimble and aggressive jurisdictions. Trying to get these larger countries to quickly adapt and embrace all the new innovations in fintech/cryptos is like trying to turn a supertanker; it takes a long, long time.

So the U.S Securities and Exchange Commission (SEC) holds endless meetings just trying to decide what cryptocurrencies are, how they fit in the financial system AND (most importantly) how to regulate them. Meanwhile in the “real world” smaller countries like Switzerland, Malta, Liechtenstein and Gibraltar have taken the lead in drafting legislation, implementing regulations and establishing infrastructures to facilitate innovation, especially in the cryptocurrency sector.

Singling out Gibraltar, I can personally attest (I am doing a security token offering there) to how reactive a smaller jurisdiction can be to innovation.

Gibraltar has evolved into a world leader in financial services including a Distributed Ledger Technology Regulatory Framework (DLTRF) and licensing system. Additionally they are light years ahead in regulating initial coin offerings (ICOs) and soon, security token offerings (STOs).

How did they do this? Well, it’s a small financial community (not unlike the old CBOT and CME) where everybody knows everybody and bands together to solve problems and get things done. Literally lawyers, heads of financial exchanges, lawmakers and administrative service professionals are only a few doors away from each other. Great minds come together, and quickly, regulations and policies are implemented. That’s how smaller jurisdictions work (try getting a SEC ruling and Congress to legislate) and why the U.S. and other “too big to manage” countries are losing out.

“To big to innovate” will ensure that the huge jurisdictions are NOT “too big to fail” in the new crypto financial regulatory world.

Bill Taylor is Managing Partner at Fintek Capital & a frequent contributor to FintekNews