JERSEY Law and Practice Contributed by: Christopher Griffin, Sophie Hancock, Tshogofatso Dhlamini, Rachael Barber, David Patterson and Mike Kushner, Carey Olsen
10.8 Cryptocurrency Derivatives A Jersey fund or exchange-traded note pro - gramme ( “investment vehicle” ) that invests in any type of crypto (including crypto derivatives) will need to comply with the usual Jersey legal and regulatory requirements applicable to the relevant type of investment vehicle. The JFSC is likely to apply additional scrutiny, given that the crypto-asset class is classified as “sensitive” under the SBPP (see 6.2 Regulation of Different Asset Classes ). If the cryptocurrency derivatives reference non- security tokens, then foregoing will apply. How - ever, if a Jersey issuer intends to issue deriva - tives that are referable to security tokens, then – in addition to the foregoing – it will need to comply with the requirements of the JFSC’s Guidance Note on the Securities Issues by Jer - sey Companies (the “Securities Policy” ). The requirements may be varied at the JFSC’s discretion. The JFSC may apply additional requirements where considered appropriate – for example, if a securities issue is not clearly targeted at sophisticated investors. 10.9 Decentralised Finance (DeFi) In Jersey, there are no specific regulations gov - erning DeFi. The trading of security tokens or cryptocurren - cies constitute an “investment” for Jersey pur - poses. Such activities would potentially require an investment business licence to be obtained under the Financial Services Law (subject to any available exemptions). 10.10Regulation of Funds Funds that invest in blockchain assets are regu - lated within Jersey’s existing fund regime. During the past few years, Jersey has seen an increase
in the number of Jersey private funds that invest in blockchain assets such as crypto-assets. The JFSC exercises more scrutiny over these funds, as crypto is “sensitive activity” under the SBPP (see 6.2 Regulation of Different Asset Classes ). Over and above the requirements applicable to Jersey funds, the JFSC generally expects funds that invest in crypto-assets to meet the following requirements. • The fund needs to have a prospectus set - ting out all the details of the fund, including appropriate risk factors relating to the crypto- assets that the fund will be investing in. • The fund needs to have credible and regu - lated service providers such as custodians. • The fund needs to be strictly targeted at pro - fessional and institutional investors. 10.11Virtual Currencies Jersey does not have the concept of a virtual currency or a blockchain asset. However, the Jersey POC Law defines “virtual asset” as a digi - tal representation of value that can be digitally traded or transferred and can be used for pay - ment or investment purposes. 10.12Non-Fungible Tokens (NFTs) The regulation of NFTs and NFT platforms depends on whether or not the issuer of the NFT is raising capital by issuing the NFT. If, for example, the NFT is issued purely on a reward basis and there is no remuneration for such issu - ance, then there is no need to obtain a bespoke COBO consent from the JFSC. However, if the issuer of the NFT is raising capital by issuing the NFT, then a bespoke COBO consent is required. From an AML perspective, the issuer of the NFT may need to register as a VASP if the NFT is
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