Against an increasingly complex backdrop in terms of political risk, market volatility and regulatory obligations, being on the front foot, demonstrating a commitment to innovation and evidencing credentials as a forward-thinking jurisdiction, has never been more important.
With that in mind, Jersey has invested considerably in articulating a long-term strategic view which has been updated over the past year to take into account recent shifts in the landscape, notably Brexit and the pace of change as regards digital, and reinforces the rationale behind our strategy.
Working with the Government of Jersey, the Jersey Financial Services Commission (JFSC) and Digital Jersey, the review is instrumental in informing how we develop our legislative and regulatory environment, enhance our product and service platform and how we engage with key gatekeepers in London and growth markets further afield.
Nowhere are Jersey’s cutting-edge aspirations clearer than in the area of fintech. With figures suggesting that the funding of fintech start-ups has increased at a compound annual growth rate of 41% over the last four years and that 82% of financial institutions expect to increase fintech partnerships within the next three to five years (PwC Global FinTech Report 2017), there is only one direction of travel and it is vital that Jersey is focused on this area.
Harnessing the power of digital technologies and creating an appealing environment for fintech business has been a real driver within Jersey’s finance industry for some years now. Particular emphasis has been placed on legislative innovation and responsiveness in order to attract fintech professionals to either set up operations in Jersey or use the jurisdiction as a testbed for new products.
A modern and forward-thinking Digital Policy Framework published by the Government of Jersey in 2016 outlines clearly Jersey’s intentions. It cites fintech as a key area of focus, made possible by a tradition for strong social capital and the ability of the jurisdictions’ highly-skilled workforce to be agile and quick to respond to opportunities.
At the same time, Jersey’s government has been keen to support and encourage investment in strategic infrastructure projects, such as the development of an ‘e-Gov’ project and roll out of gigabit fibre connectivity to all households and businesses in Jersey, to support delivering a world-class digital eco-system.
Understanding this trend and recognising the potential opportunities presented by fintech is proving pivotal in delivering ground-breaking innovative services for Jersey’s international client base, significantly transforming the finance sector and serving to contribute to the diversification of the Island’s economy.
For instance, the establishment in Jersey of a fintech proposition development group working with industry, together with an active dialogue between Jersey Finance and Digital Jersey, is helping to ensure there is a constant focus on enhancing the environment in Jersey for fintech activity and that Jersey remains at the forefront of fintech developments. Jersey Finance has also established industry working groups to explore and progress opportunities in the regtech, cybersecurity, wealthtech and virtual currency space.
These efforts have resulted in a good track record of achievements already. Today there are more than 2,250 people employed in digital industries in Jersey, whilst a number of developments in recent months are shining examples of the new ground Jersey is breaking.
It is notable, for example, that the world’s first ever regulated bitcoin fund – the Global Advisors Bitcoin Investment Fund – was launched in Jersey in 2014, whilst in 2016 Jersey became one of the first jurisdictions to adopt a regulatory regime for virtual currencies, creating a ‘regulatory sandbox’ requiring compliance with KYC and anti-money laundering rules, whilst also allowing for virtual currency innovation.
Meanwhile, last year, the world’s first regulated crypto-denominated fund was established in Jersey – it trades cryptocurrencies and other ‘coins’ and participates in selected initial coin offerings (ICOs) – and the end of last year saw the launch of Jersey’s first ICO, the ARC Reserve Currency (ARC), an asset-backed ‘stablecoin’ virtual currency.
All this sends out a clear message that Jersey is committed to playing a key role in the fintech space and is focused on creating a clear, certain and robust framework that is conducive to good practice.
With the UK positioning itself as a global leader on fintech development, Jersey’s proximity to and close relationship with the UK stands it in good stead too. The UK boasts a specialist fintech workforce with around 1,600 fintech firms operating in the UK (UK FinTech Census 2017, EY 2017).
Jersey can look to collaborate, tap into and support that success, with a view to creating digital solutions that can transform international financial services in the future in terms of better access to services, more bespoke advice, enhanced security and more reliable due diligence.
We see, for instance, potential for businesses to explore the use of artificial intelligence (AI) in providing quick, tailored wealth planning advice or in algorithmic trading and quantitative funds. In a global environment where governance, risk and information exchange are increasingly important for firms engaging in cross-border financial business, new approaches to handling data securely and reporting regulatory information efficiently can help position Jersey very strongly indeed on the international stage.
Beyond the digital space and the world of fintech, Jersey is also focused on innovation in other areas with a view to keeping on the front foot by focusing on enhancements to its suite of services and products to meet the increasingly sophisticated demands of international investors.
On the legislative front, after much consultation, amendments are due to come into force later this year to Jersey’s long-standing trusts law, reflecting the jurisdiction’s progressive approach to legislative innovation and its desire to keep in step with the times and the requirements of internationally mobile families and individuals.
At the same time, Jersey has set out on a journey in recent years to create a robust professional environment for philanthropy and provide a framework for advisors to deliver high-quality philanthropic advice. The final elements to Jersey’s innovative Charities Law are also scheduled to come into play later this year to ultimately create a world-leading framework for the modern-day global philanthropist.
Meanwhile, in the investment funds space, Jersey’s world-class funds regime has undergone a comprehensive review over the past couple of years, with the result that last year Jersey’s alternative funds proposition was enhanced with the introduction of the highly innovative Jersey Private Fund vehicle – a structure reserved for limited numbers of sophisticated institutional investors.
The structure has proven incredibly popular amongst alternative fund managers, with almost 90 structures being established in the first eight months since its introduction, including the world’s largest ever private equity fund. We anticipate further innovations within our funds environment in due course.
Of course, understanding our core overseas markets is also vital as we look to enhance our service and product lines in response to market demand. For that reason, we continue to build our library of evidence-based research to inform these developments and our activities in those markets, whilst also delivering insights to the market.
For instance, during 2017, Jersey Finance sought to undertake a number of reports including ‘Jersey for Institutional Investors’ (Europe Economics, 2017), which for the first time shone a light on the value of Jersey for institutional and pension fund investment.
It found that pension fund assets structured through Jersey are supporting more than 60 million people around the world in their retirement and is proving useful both in explaining the value Jersey brings to the global economy and in building Jersey’s institutional investment business further.
Meanwhile, two separate reports published last year (‘Driving Forces Behind GCC HNW Investors’ and ‘How to Service Chinese Wealth as it Goes Global’, Hubbis, 2017) have provided invaluable insights into attitudes towards family wealth and family business succession planning, levels of understanding when it comes to international compliance and reporting requirements, as well as appreciation of the structures available to them.
Both reports are being used to tailor Jersey’s approach in those markets and ensure that Jersey is ready to adapt and innovate further so that it provides a better framework and infrastructure in the future.
Closer to home, we are also investing heavily in our advocacy work to ensure that our role and aims are understood locally. We are rolling out an innovative strategy to help us communicate more effectively with our local audience so that they have a better understanding of the value of our industry and our pride in being part of Jersey’s success.
In particular, we are fully aware that our future as an industry is reliant on young people and it is important that we tell our story clearly and honestly, whilst adapting to ensure the industry remains an attractive career proposition. Ultimately, if we can attract and retain the best young talent, we will be in a very strong, sustainable place going forward.
This communications strategy has also been tailored to our global audiences in order to influence perceptions, promote advocacy and create a better understanding of the positive role Jersey plays for international economies.
With a firm eye on the future, Jersey is very much on the front foot to navigate an increasingly complex landscape. By focusing on digital innovation and the opportunities presented by fintech, maintaining investment in research that can deliver valuable insights and help explain our role, whilst continuing to work with key partners to develop exciting new products and services that can benefit us all, we will be well placed to adapt and maintain our position as a leading international finance centre.