The Isle of Man is racing to legislate to create a new marketplace for trading data assets as financial instruments, allowing data to be traded or secured as collateral for loans.
Data is immensely valuable. Some businesses have discovered that the data they hold is more valuable than their shares. So if that data is monetised, it can be a boost to the company’s value or even an essential lifeline.
Take the US air carrier United Airlines, says Kurt Roosen, head of innovation at Digital Isle of Man, the government organisation tasked with digitising the island. When Covid brought the aviation industry to a standstill, United used customer data from its frequent flyer programme as collateral for a $5bn (£3.6bn) loan from a consortium of US banks. That made the data more valuable than the airline’s routes, gates and takeoff and landing slots combined.
There are no universal standards to determine the value of an organisation’s data, however, meaning data assets must undergo a lengthy, complicated auditing process before they can be secured or traded. The Isle of Man’s new data initiative aims to both expand the use of data as financial assets and simplify the auditing process by ensuring robust data governance across the market.
Introducing data asset foundations
With Pinsent Masons, a law firm, the Isle of Man is working on a governance framework that aims to simplify the classification of data as a financial asset. Right now, they’re ironing out the kinks – a significant task considering that no legal precedent exists. “We’re creating a context here that other jurisdictions will accept,” says Roosen. “Some of the legal work we’re doing includes definitions of data assets – nowhere else in the world defines those.”
Organisations in the Isle of Man can register as ‘foundations’: incorporated legal entities that are similar to companies but have no shareholders, allowing for considerable operational flexibility. The island plans to establish data-asset foundations, which will hold companies’ data and enable it to be traded, collateralised or considered as intangible assets, like intellectual property, to increase the value of M&A activity.
As an island, we can amend our laws easily. In other jurisdictions that change will take years.
“We’re going to put these frameworks in law against every one of these foundations,” says Roosen. “Once we do, we certify the organisations to show they’re meeting those requirements and allow them to portray those to the world.”
When data is registered with the island’s data-asset foundations, it must meet strict governance criteria. Certification by the Digital Isle of Man is a sign to prospective business partners that the data in question is auditable, compliant and managed properly by default. Once they are certified, data assets can put into a public marketplace where they can be sold or shared, either for social good, such as university research, or for profit.
The certification criteria is informed by two existing data frameworks: the Data Management Capability Assessment Model (DCAM) and the Cloud Data Management Capabilities framework (CDMC), crafted by the Enterprise Data Management Council in the US. These schemes set out best practices for securing and managing data and are used by the BoE, the London Stock Exchange (LSE) and the Financial Conduct Authority (FCA), as well as by top-tier commercial banks. The BoE, LSE and FCA will train local service providers on the Isle of Man to help them implement these digital-asset foundations, according to Digital Isle of Man.
The benefits of data asset foundations
Agnieszka Ablazej-Strandskov, a business analyst at Digital Isle of Man, describes the initiative as an effort to build a “new type of economy” based on data-sharing.
“Data centres will benefit, because the data assets will be held here, especially for collateral with bank loans,” Ablazej-Strandskov says. And the local economy will benefit because organisations registering their data in the crown dependency will pay a licence fee, she adds. Local service providers, meanwhile, are expected to offer services such as data escrow.
Other countries and trade blocs are also in the process of creating data-monetisation regimes. But the Isle of Man’s initiative has progressed quickly thanks in part to the territory’s small population (90,000 people) and relatively quick-moving parliament, the Tynwald.
“All jurisdictions are looking into monetising data but we have the first move to advance, because we are flexible and agile,” Ablazej-Strandskov says. “As an island, we can amend our laws easily, whereas other jurisdictions have complex legal systems where that change will take years.”
The Isle of Man has faced criticism over its low-tax regime. The BBC once described it as the “island that swapped donkey rides for offshore cash”.
But, in 2009, the island broke ranks from the other crown dependencies by introducing new tax-transparency laws. More recently, it has attempted to put digital businesses, specifically e-gaming and cryptocurrencies, at the core of its economy.
These industries, however, are still heavily reliant on offshore activities and favourable tax laws. Roosen suggests the island’s new data-asset foundations could help to broaden the Isle of Man’s digital prospects even further.
“We’re not degrading anything that’s been done here already, that has got its own niche,” Roosen says. “What we’re doing is creating a new one – and we believe if we do that right, that’ll be bigger than anything we’ve done before.”
The Isle of Man is racing to legislate to create a new marketplace for trading data assets as financial instruments, allowing data to be traded or secured as collateral for loans.
Data is immensely valuable. Some businesses have discovered that the data they hold is more valuable than their shares. So if that data is monetised, it can be a boost to the company's value or even an essential lifeline.
Take the US air carrier United Airlines, says Kurt Roosen, head of innovation at Digital Isle of Man, the government organisation tasked with digitising the island. When Covid brought the aviation industry to a standstill, United used customer data from its frequent flyer programme as collateral for a $5bn (£3.6bn) loan from a consortium of US banks. That made the data more valuable than the airline's routes, gates and takeoff and landing slots combined.
