The Isle of Man and the hubbub of Hong Kong may seem like polar opposites but they are battling it out for fintech supremacy.
The famously picturesque Isle of Man is not exactly what you think of when you imagine cutting edge technological innovation, but the island is one of the areas that are leading adoption of Bitcoin for everyday transactions.
Customers paying for items in certain coffee shops or with chauffeur driven car firms, are able to pay for their goods using the cryptocurrency, and the Manx government wants the island to be a hub of Bitcoin development.
Across the Isle of Man, population 85,000, around 20 startups are working on Bitcoin and blockchain projects.
Both the Isle of Man and Hong Kong offer a competitive tax environment which is attractive to startups looking to pioneer new technology, but Brian Donegan, the head of digital business at the Manx government’s Department of Economic Development, told CBR that the Isle of Man offers greater advantages than its Far Eastern rival.
"If you were to create a skills matrix of the jurisdictions that we compete with across a number of criteria, such as the political, regulatory and legal aspects of our offering you would find it very, very difficult to come close to a competitor that has anything like the suite of offerings that comprise our position," he said
Donegan explains that the Bitcoin community "was really looking for a jurisdiction to call home", and the Isle of Man decided to step in around two and a half years ago.
Content from our partners
The island’s fintech story began further back than that though, over a decade ago, after its Government decided to actively try and attract premium online gaming firms to the island, with major firms such as PokerStars and Playtech setting up shop there. Indeed, some of the fintech pioneers on the island have come from these firms.
This, combined with financial services industry, which is attracted by the Manx low tax environment, and makes up 35% of the island’s GDP, and robust IT infrastructure, thanks to the placement of telephony cabling that links Britain and Ireland and runs through the island.
The island also has a "state of the art, tier three data centres", and is "self sufficient in power generation," Donegan says.
Add to all that the fact that it is only about an hour away from the financial centre of London, and you have, what he says is "a perfect environment for fintech".
Not that the island is so desperate to bring in the technology that it is prepared to be seen as the wild west of Bitcoin, which is often associated with the less salubrious aspects of online shopping . Las year it brought the cryptocurrency into its anti-money laundering regime, and has also beefed up the powers of the regulator to look at the books of firms coming onto the island. Donegan said that the island deliberately makes "the barrier to entry…quite high".
Hong Kong, as a high tech financial hub, is also hoping to capitalise on the fintech gold rush.
Data compiled by accountants EY at the end of 2015 showed that 29% of the digitally active population there have used at least two fintech tools in the last six months. This proportion 12% higher than New York, 16% higher than Singapore and is 15% higher than London, generally regarded as the world’s fintech capital.
Startups in the region include payments firm Vipster and Coinsimple, and social lending platform WeLend, and its monetary authority has released an echeque service.
Fintech in Hong Kong has benefited from venture capital, and is also seen as a gateway to the lucrative Chinese market, and its tech giants such as Alibaba.
In June 2015 a report sponsored by KPMG, DLA Piper and Thomson Reuters for the Hong Kong Internet Finance Council said: "Investment by both the government and the private sector in business start up, incubation and accelerator facilities is encouraging new firms to establish themselves and test new ideas. "
Both jurisdictions face challenges though. For Hong Kong, the report says that "Scaling businesses, however, can be hard due to the city’s high rents and relatively small labour force."
The Isle of Man faces a battle to get British banks to clear bitcoin transactions, with many firms currently having to do their clearing for these transactions in places like Scandinavia.
Furthermore, as the aforementioned EY numbers show, major financial centres such as New York, and London in particular, are also keen to make their mark on this emerging industry, so competition will remain strong. It’s clear though that both the Isle of Man and Hong Kong think they have a compelling offer to fintech, which they will be making loudly during 2016.
