San Marino — not just another jurisdiction
An analysis of what are the key elements of a jurisdiction to compete as a body of regulatory solution for blockchain-based businesses
San Marino has recently adopted what could be called a form of “Minimum Viable Legislation.” The San Marino Innovation team, which the government has granted regulatory authority, is composed of people with expertise and experience in the startup sector. The strengths of this ecosystem are practical solutions and a set of services and actors who are effective and efficient not only in theory, but also in practice.
By Alessandro Palombo, CEO and Co-founder of Jur
Various jurisdictions have proposed regulatory solutions but they have failed to provide infrastructure to support their plans, resulting in high costs and slow reaction times.
There are several advantages that San Marino offers and, thanks to a solid scaffolding, San Marino has a good chance of becoming a European reference hub, offering affordable costs, professionalism and clear procedures, both in theory and in practice. I am pleased to be able to make my contribution to this evolving model, pouring into the project what I have learned from two years of work in the Zug Cryptovalley (in Switzerland) and in other countries.
San Marino 2020, for the blockchain world, will bring with it the birth of a brand new ecosystem.
I will share some wide-ranging reflections on why I am happy to be able to contribute to this nascent blockchain ecosystem and how I think it will evolve in the coming years.
For an operator in the blockchain field, at least of European extraction, there are several interesting countries, in terms of regulations and ecosystems: neighbouring Switzerland, which is a pioneer in this field, Singapore, and others.
Those who have been in the blockchain world for some time know perfectly well that, until now, the ideal solution, from all points of view, has not existed.
Why? First of all, the concept I would like to share concerns the often important distance between the formal and substantial data on jurisdictions and ecosystems.
Jurisdiction for blockchain projects
A couple of years ago, when ICOs were exploding, everyone was asking “how can we choose the best jurisdiction?” People were focusing on determining the criteria to identify a particular jurisdiction as being superior to all others. My point of view is that talking only about jurisdiction is reductive, both legally and in a more general strategic sense.
If you want to run an ICO, STO, or other capital-raising solution for blockchain projects, you don’t just need to find a country with the right legislation. You also need an ecosystem that can efficiently support your project.
I think it is important in 2019 to make it clear to aspiring blockchain entrepreneurs that the theoretical component of legislation collides with actual practices and missing infrastructure that often make the future of a project difficult or problematic and, sometimes, undermine the foundations irreparably.
Without going too far in the technical direction, regulations may seem clear in theory, but in practice they can be ambiguous. For example, regulations may allow a project to issue a utility token, subject to the condition that there is a platform for its use, but how complete must the platform be? Regulations may also fail to clarify the limits of the number of private investors that can be accommodated before the project is considered a collective investment scheme. Filling in the theory with practical details is a crucial step in providing a good environment for new blockchain projects.
Is it really just a question of regulation? Jurisdiction vs. ecosystem
Some elements are central in this respect.
There are competent lawyers and service providers in every country, but some ecosystems are faster than others, because speed comes not just from competent individuals, but from the systems of rules and best practices under which they operate.
In the absence of strong voluntary professional best practices, the presence of vigorously enforced regulatory guidelines is essential.
I will not go into technical detail, but our experience in Jur teaches us that there can be various friction points for the efficiency of a project:
- Opening of bank accounts: essential to ensure the preservation of the capital raised, protecting it from fluctuation in value, and therefore protecting the ability of a project to deliver results;
- KYC and AML platforms must comply with the local law of the host country and are recognised as such by the bank with which the project manages to open the current account;
- Effective responsiveness of the regulatory body, ability to listen to and resolve detailed issues not adequately covered by the legislation.
These elements, by way of example only, distinguish between regulation from an impeccably formal point of view and that of a truly valid ecosystem.
The following are the elements that help and that today I would be looking for if I were choosing a jurisdiction in which to incorporate:
- the presence of local VCs with a proven track record of supporting successful partners;
- the presence of associations, accelerators, events on the spot;
- external recognition of stability.
San Marino Innovation
The Team
For these points above, a few months ago I got in touch with San Marino Innovation and I thought that an ecosystem like this could have a good chance of doing well.
The initial good impression soon turned into a joint work effort and, from the inside, I can say that the team that is steering this ship share some powerful values and a vision of a far and vast horizon of possibility combined with an eye for practical detail.
The people I came into contact with the most were: Sergio Mottola, the president of San Marino Innovation, who is an upstanding and dynamic innovator with both skills and a direct track record in the field of startups and digital strategy.
Sara Noggler, a tireless institutional developer, proactive and available, and it is thanks to her that I came into contact with the ecosystem initially.
Vanessa D’Ambrosio and Margherita Amici, legal consultants of San Marino Innovation, who really showcase the concept of going the extra-mile in being at the service of the Institution.
Speed and proactivity of the regulator
The strategic choice of appointing a joint-stock company, even though it is owned by the State, through the Chamber of Commerce, makes it possible to guarantee agility and high operational dynamism. The strengths of this system are not only legislative but in the ability to dialogue directly with the regulator, and to solve every possible problem step by step in an efficient manner.
San Marino 2020 — towards the ecosystem
The next challenge for San Marino is to actually construct the ecosystem. A large number of projects are in dialogue to start from or move to San Marino. I believe that by the end of 2019, there will already be the first practical examples on various fronts and that San Marino in 2020 can begin to establish itself as a reference hub.
In this context I am honored to be able to give my strategic contribution to make bureaucracy less and less a problem and I believe that tech ecosystems working in every aspect are the most indispensable for the blockchain ecosystem, a global ecosystem that requires certainty, stability and clarity to be able to assert itself in the next ten years.
The interesting fact is, unlike the Internet ecosystem, which lent itself better to localizations, as in Silicon Valley, the blockchain industry lends itself by its nature to globalization. Events and meeting points are global, as are many of the blockchain-based services that were born and will be born in the years to come.
In this context it is interesting to note how small jurisdictions can play a highly strategic role in the next few years and in my opinion these are the ones that have more chances thanks to a greater speed of adaptation over larger jurisdictions.
In my opinion, in fact, it will not only be a question of laws and regulations but a question of concrete efficiency of regulatory bodies and it is foreseeable that new needs will arise in as little as five years. The game will therefore not be won by the largest, but by the fastest — the one who will be able to excel in competition with other states by offering a simple service, that is better from the point of view of user experience.
Although no one can predict the geo-regulation blockchain world of the next ten years in exact detail, I am very happy to undertake this adventure alongside San Marino and accept this challenge of shaping the future that is, in my opinion, very promising.
NOTE
Clear banking framework: coming soon
The banking framework is under discussion and expected in August to ensure a current account opening regime for certain, clear, and efficient crypto-related projects.
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