The Isle of Man: Smart Contracts Definition and Legality

The term ‘smart contract’ has not been used by the regulators of Isle of man. Related definitions can be seen below:

  • Fiat currency: a.k.a. “real currency”, “real money” or “national currency” is the coin and paper money of a country that is designated as legal tender.

  • Digital currency: refers to any electronic representation of a fiat currency and this can include representations of virtual currency.

  • Virtual currency: is a narrower asset and is a digital representation of value which can be traded digitally. The nature of a virtual currency means that it does not need to be (but may be) centrally controlled or administered. Virtual currency can be either convertible or non-convertible.

  • Convertible virtual currencies (CVCs): include crypto-currency e.g. bitcoin and ether. CVC’s can be bought and sold through independent exchanges for fiat currency. For a currency to be convertible, there does not need to be set rate or an established benchmark, merely that a recognised third party market exists and the ownership rights can be transferred from one person to another(whether for consideration or not). CVCs can be used as a method of payment as an alternative to using fiat currency

  • Non-convertible virtual currencies (VCs): include virtual goods, such as digital “skins” for avatars or items such as weapons within video games. VC’s also include currencies that exist within the context of a specific game for the purpose of buying in-game items etc. VCs differ to CVCs in that they are not used in the same way as fiat currency and are not broadly used as a method of payment.

  • Virtual currency business: means the business of issuing, transmitting, transferring, providing safe custody or storage of, administering, managing, lending, buying, selling, exchanging or otherwise trading or intermediating virtual currencies.


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