One of the issues in governance of issuance and other assets is where you site your servers. Just the act of siting your servers opens the business to jurisdictional effects. As the legal and regulatory status of independent issuance is uncertain, many issuers have gone to offshore regimes. This isn't for the popular reason of escaping harmful taxes, but for the more practical reason of seeking small and simple jurisdictions that are efficient to deal with.
By way of example, consider the US, where there is a broad range of agencies that have some sort of interest that could lead them into regulating issuance. Perversely, even though the US is one of the most friendly countries for issuance businesses, it is practically impossible to be in compliance because there are simply too many regulators. Witness the Paypal story, which includes many wrangles with many regulators. In Europe, where there is often a catch-all financial regulator, it's much easier to figure out who one should be in compliance with, but the environment is much less friendly towards issuance (see the eMoney directive for the "like-a-bank" approach).
Offshore islands are just so much simpler, and most of them are only worried about crooks and/or bad perception. Yet, siting offshore exposes you to other risks such as poor connectivity and poor governance. And then there are all the normal disaster issues that nobody likes to talk about.
The Isle of Man has thought about this, and come up with the concept of home jurisdiction recovery siting. If you use an Isle of Man firm to do your disaster recovery, it seems that they will permit you to retain your home jurisdiction.
It's a very curious concept! There are many curious angles to this, and it could well take off in directions they hadn't thought of. One to watch.
Isle Of Man Set For Role As Global IT Disaster Recovery Hub
by Jason Gorringe, Tax-News.com, London
13 September 2004
The Isle of Man government has been actively pursuing measures that could propel the Island towards assuming the mantle of the world’s IT disaster recovery hub in the field of financial services, the local media has reported.
In a bid to achieve this, the Island’s authorities are seeking to agree memoranda of understanding (MOU) with multiple offshore jurisdictions which would allow firms using an Island-based disaster recovery service to operate under the same regulations as in their home jurisdictions, according to the Isle of Man Online.
Legislation has been passed with the aid of the Financial Supervision Commission, and it is said that the measures are the first of their type anywhere in the world.
The report quotes Tim Craine, director of e-business, as noting: “It was a perfect example of government working very closely with the private sector. There was an opportunity for the Isle of Man to become a world leader for disaster recovery if we could make it simple and easy for offshore companies to use.”
He added: “The FSC was happy to comply as long as the businesses using the service were subject to adequate supervision in their own jurisdictions, in order to protect the reputation of the Island.”
The initiative is to target offshore jurisdictions that may be vulnerable to natural disasters, such
Posted by iang at October 6, 2004 08:04 AM | TrackBack