Shifting from tax haven to bitcoin trading hub, the blockchain might push the Isle toward IoT innovation as the island launches a pilot project with startup Credits
UK-based blockchain startup Credits and the government of the Isle of Man are launching an IoT security trial across the island, the two announced Monday, and it could be the beginning of a new renaissance for tech experimentation on the Isle of Man.
“The idea behind [the experiment] is that IoT has a promise of assigning a unique, non-forgeable identity to physical items and what the blockchain provides is the way of managing and maintaining an identity,” Credits Co-founder and CEO Nick Williamson told Financial News. Spoofing, as it is commonly known, allows hackers to mimic someone else’s authorized devices in order to gain access to information or attack private computer networks, in this case IoT networks.
For the purposes of the experiment, the Isle of Man and Credits will assign test IoT devices with unique ID numbers that will be recorded on the blockchain, presumably allowing security software to use the blockchain ledger as a reference to verify authorized devices and block duplicates.
Credits was made the UK’s official — yes, official — blockchain technology provider in an agreement announced last week through the government’s G-Cloud program (“government cloud”) to integrate government bodies with cloud-based IT. Thanks to G-Cloud, London has been gleefully experimenting with cloud, and by extension blockchain, over the last year. The program is making it easier for tech startups to sell their products to government interests, opening up the so-called B2G “Digital Marketplace” in the UK. July brought revelations that the UK, Barclays and blockchain startup GovCoin were tracking benefit payments with the technology, for instance.
The Isle of Man has had a working relationship with the company for over a year already, which means that the ball on this particular project has probably been rolling for some time now. The partnership between the Isle and Credits, then called Pythia, started in May 2015 with the announcement that Credits would help organize a registry of digital currency companies who were taking advantage of the Isle of Man location, with 25 formally located there in 2015 according to CoinDesk. Some businesses on the island, like café and restaurant Java Express, have begun accepting bitcoin payments via QR code.
“Instead of just being another jurisdiction, why not come up with some solution for the industry and go to market with that,” the Isle of Man’s head of digital development and e-business Brian Donegan told Geektime, describing the local government’s thoughts on investing in IoT technology. “If you can solve the IoT hacking problem, that should bring investment back into the IoT space, [so] we set about working with Credits again.”
The wires wrapping the jewel in the crown
Despite being politically independent, the Isle of Man is a so-called Crown Dependency — it has no army and relies on the UK, but also retains the right to make its own laws and diplomatic connections. The island has signed onto the European Union’s anti-money laundering plan (AML4) even though they are under no obligation to as a non-member. The Isle of Man maintains its own independent currency, the Manx pound (IMP), which is pegged at a 1:1 exchange rate to the British pound.
The Isle of Man has a unique business atmosphere that has allowed it to become a destinations for offshore accounting. There is no corporate tax and no capital gains tax, with a minuscule income tax rate between 10 and 20 percent. The island is working hard to avoid the reputation of a place like the Cayman Islands and to shake off some bad press thanks to the Panama Papers leak earlier this year. Regulations are considered to be strong here. They have to be, says Donegan.
“One of the things that came up when we got into e-gaming in the 2000s was the government insisted we be a dominant player in [the] space but if we were to do that we’d 1) keep crime out and protect consumers and 2) put in place the best regulatory system we could build,” Donegan emphasized to Geektime, saying they intended from the start to only target the “premium” end of the industry. “There was an understanding the quality at the premium end of business had opportunity for us, but we still had to mitigate risk.”
From tax haven to digital playground
In 2014 S&P chose to downgrade the Isle of Man’s credit rating on fears new regulations would do in its offshore banking industry. Actively avoiding the lingering bankruptcy of fellow isle dependency and finance haven Jersey, the government is taking advantage of its infrastructure and an energy surplus to diversify its economy. Slightly more than a third of GDP still depends on financial services. Some 1,800 people are working in the ICT market, receiving an average annual salary of £60,000. Companies like Credits have come to take the offshore finance legacy and morph it into the foundation of a new digital currency hub.
“I think the industry (bitcoin and cryptocurrency) was attracted to the Isle of Man because the Isle of Man had a grasp of the technology.” He points out how in the transactional nature of the business, “to be headquartered in a place where you don’t have to worry about the technical infrastructure is a no-brainer. To find a place like that in Western Europe is a bit special.”
Donegan is referring to the island’s unique digital infrastructure situation. The Isle has been able to capitalize on its unique geography as the chosen, natural midpoint for submarine internet cables laid between Northern Ireland and Britain, something that Donegan says pushed the island to build six major data centers and helped them reach 100% internet penetration among the island’s residents. The government has shown a commitment to expanding an Isle of Man startup ecosystem by launching a £50 million Enterprise Development Fund, financed entirely from public cash and plans to open a new ICT-oriented university with its freshman class starting courses in September.
“The Isle of Man has a unique combination of things: world class telecoms, 100% broadband penetration, six tier 3+ data centers, and we generate all own electricity from natural gas and sell surplus power to UK’s national grid. For tech purposes we’re very self-contained.”
From gaming to bitcoin to self-driving cars
Confident that they had the ability to maintain the IT infrastructure necessary for running heavy operations, Donegan told Geektime that, “We decided to go after the gaming world.”
He says the Isle very quickly attracted the heavy hitters in gaming community. Pokerstars shifted its HQ from Costa Rica to the island, while RNG Gaming, Get21, Microgaming out of South Africa and Playtech all set up shop. The vertical took off, now representing some 17.5% of the island’s economy and by far the bulk of its ICT sector (which all together makes up a quarter of the crown dependency’s industry).
But its unique social and geographic isolation also made it an ideal test center for telecoms. O2 began testing 3G with 27 towers on the island in the mid-2000s and gave devices out to select residents. From there, they rolled out 3G to the rest of the UK and then Europe. But the new love affair with bitcoin could be the thing that turns the Isle of Man into the Isle of Things.
“The story changed in 2013 when we got interest from the digital currency exchange community,” Donegan continued. “They wanted to move to the Isle of Man because there was a convergence between digital currency and e-gaming.”
Securing IoT with blockchain has been getting a lot of chatter, but the reasons the Isle of Man came to test it was to expand its portfolio, not because it is some sort of open lab for IoT experiments . . . yet. As mentioned with the O2 trials a decade ago, the island certainly does have the potential (and the money) to turn itself into just that, a giant IoT launching pad. A number of cities are working with Cisco and Samsung to do the same. When asked about the potential to move in the same direction, Donegan didn’t dismiss the idea outright.
“We don’t have a Smart City program but have a lot of individual exercises at the moment in relation to renewable energy (wave, wind, marine), but in terms of a cohesive strategy, not at this point.” Yet, they have their sights set on the next big thing already.
“We’re looking at how we can take autonomous vehicles (AV) and use the Isle of Man as an enhanced location for testing of AV. I say ‘enhanced’ advisably. If you look at AV. . . they too need to be protected, i.e. the protection of the data used.”
Now, with the island’s increasing public investment in digital currency, fintech and now IoT security, you can expect that the small isle of 85,000 will be in the game for sometime to come, continuing to evolve.