The UK's offshore tax havens are quietly luring investors away from the likes of the Cayman Islands and Bermuda this 'crypto winter'

The Channel Islands, a string of small British overseas territories, are quietly offering incentives to lure investors from more traditional tax havens.

Thanks to their favorable tax laws, Jersey and Guernsey are attracting some of the world's most innovative companies.

Capital gains and inheritance tax are not applicable to the island.

Both islands had begun competing for the booming asset class before the mainstream came along. Edmund Hatton, a leader at Digital Jersey, told Insider that he first noticed clients talking aboutcryptocurrencies in 2011.

Assets worth $3 billion are managed by CoinShares in Jersey. Jersey was used by the Swiss-based group to set up its exchange traded product.

Miami, which has established itself as one of the US's best-knowncryptocurrencies, was visited recently by the chief executive of Guernsey Finance.

Barney Lewis, a fund manager at ZEDRA, said that it was part of an effort to lure western investors to the island.

He told Insider that they were competing against the other side of the ocean. The investors from Brazil and South America have fallen out of love with the island.

Digital assets have retreated from the market over the last nine or 10 months.

It has been less than a year since ethereum was at its all-time high of $69,000 and less than a year since it was at its all-time low of $4,866.

As consumer inflation has rampaged to multi-year highs around the world, traditional investors are starting to doubt the effectiveness ofcryptocurrencies as portfolio diversifiers.

Six months ago, Lewis said, you'd see portfolios with traditional equity, fixed income, and then maybe 2.5% to 5% digital currency as inflation hedges. It appears to be a terrible inflation hedge now.

Longtime digital asset bulls argue that a "crypto winter" can benefit the space by stress testing key infrastructure and encouraging greater efficiency.

Experts said that the space's maturation could increase investors' appetite for low-tax places.

Jonathan Van Neste, a partner at Jersey-based Oben Regulatory, told Insider that in the winter there could be a consolidation of thecryptocurrencies. It would lead to a lot more diversified investment opportunities in the space.

The Channel Islands are optimistic that a proactive approach to attracting investors will put them in a good position to profit from a return to cryptocurrencies.

"I don't think we missed the boat," Lewis said. It has been slow in the funds space, but we have to hope for the best.

Puerto Rico's generous tax breaks are attracting an influx of entrepreneurs.