As the crypto industry gets bigger and brighter, a string of small British overseas territories is offering crypto investors incentives to move their money from more traditional tax havens.
Located off the French coast, Jersey and Guernsey are attracting crypto blockchain and other fintech firms with favorable tax laws. The islands have no capital gains, nor inheritance tax – making them attractive locations for investment firms. Both the islands had started competing for the booming asset class even before crypto entered the mainstream. Edmund Hatton, a fintech lead at Digital Jersey, initially noticed clients talking about Bitcoin and crypto way back in 2011.
Since then, Jersey has attracted firms like CoinShares which manages assets worth about $3 billion. The company used Jersey to establish its crypto-backed Physical Bitcoin exchange-traded product in January 2021. Barney Lewis, a Guernsey-based fund manager at ZEDRA, believes it’s part of an effort to bring in western crypto investors to the island and away from rival tax havens like the Cayman Islands. He shared that they are competing directly against Cayman and are seeing the migration of US funds out of there. Lewis says Brazilian and South American investors have fallen out of love with Cayman, and thus, are moving the capital to Guernsey.
Furthermore, Lewis said that six months ago, one would see portfolios with traditional equity, fixed income, and then 2.5 to 5% crypto as an inflation hedge. Now he says it looks like a terrible inflation hedge. Experts outline that longtime digital asset bulls shrug off these sell-offs believing that the crypto winter can benefit the space by stress testing key infrastructure, consolidating major firms and bringing about greater efficiency. That could boost investors’ appetite for low-tax jurisdictions like Jersey and Guernsey.