Gibraltar: the jurisdiction of choice for blockchain
Gibraltar’s finance sector is dynamic, continually evolving to accommodate the emergence of new industries, technology and the entrepreneurs, whilst always catering for the needs and protection of consumers.
Not since the emergence of the online gaming sector has a new area of business been met with such excitement in Gibraltar. DLT is essentially a public ledger consisting of replicated, shared, and synchronized digital data spread across multiple sites, countries, or institutions. It is decentralised, meaning that it functions completely peer to peer and therefore does not rely on a centralised institution to police it (such as a government or national bank). It’s disruptive and despite attempts from various authorities around the world over time, it’s not going away.
The underlying technology has seen increased use across a variety of sectors in a number of countries (including but not limited to crypto currencies, land property registries, tax systems etc).
In October 2017 the Gibraltar Government published the landmark Financial Services (Distributed Ledger Technology Providers) Regulations 2017 (the “Regulations”), thereby creating a regulatory framework allowing new businesses to grow and develop the use of DLT whilst also providing a “safe space” for the potential consumers of these businesses. On the 1st January 2018, the Regulations came into force.
Whilst it may seem counterproductive to create a regulatory framework for an industry that prides itself on being decentralised, the regulation of DLT is essential to its success. The Regulations attempt to carefully balance the ultimate goal, one that will protect consumers and Gibraltar’s reputation as a finance centre and one that will create an environment allowing DLT related business to flourish due to its enhanced reputation as a regulated entity. DLT’s many potential uses means that it is near impossible to establish a “one size fits all” regulatory framework.
The Regulations seek to regulate the providers of the services (“DLT Providers”) as opposed to the underlying technology itself, which is decentralised. The Regulations will regulate those “carrying on by way of business, in or from Gibraltar, the use of distributed ledger technology for storing or transmitting value belonging to others”. In other words the quasi banks (Wallet providers) and quasi bureau de changes (Exchanges).
The Regulations will seek to provide protection for consumers by requiring DLT Providers to satisfy certain requirements largely contained within the “9 Principles” within the Regulations. Principles such as; honesty and integrity, the maintenance of financial and non-financial resources and the management of business with due skill and care are but some of the principles that DLT Providers will need to satisfy in order to be granted a licence. Therefore, DLT Providers will be held to account to a high regulatory standard.
Over the last few months, by and large as a result of the implementation of the Regulations, Gibraltar has seen a huge increase in DLT start-ups begin to set up in Gibraltar for the purposes of being able to provide their services in a safe and regulated environment. In a recent statement, the GFSC confirmed that it has received more than 30 applications for a licence. Even more recently, Gibraltar was ranked as the second most blockchain friendly country in Europe by Coin Telegraph.
Interesting times are certainly ahead.
Contributed by Triay & Triay, Gibraltar.