With Gibraltar leading the way to Distributed Ledger Technology legislation then if you want to get on board this is the doorway for you.
DLT Tech Regulatory Framework
As mentioned previously and indeed in yesterday’s blog as of the 1st January the The Gibraltar Financial Services Commission’s (GFSC) DLT Regulatory Framework came in to effect. This means that firms in Gibraltar, that use DLT (also known as blockchain) to store or transmit value belonging to others, now have to apply for a licence from the GFSC.
Both the GFSC and the Gibraltar Chronicle had something to say on the issue:
The GFSC holds as its primary objective to protect consumers and the reputation of Gibraltar when considering any licence application and in its supervision and enforcement functions. We have been working to make sure the DLT Regulatory Framework meets the GFSC’s regulatory and strategic objectives, as laid out in the 9 regulatory principles designed for DLT applications.
The GFSC is the regulator of the Gibraltar financial services market, regulating providers of financial services conducted in both Gibraltar and other jurisdictions. The GFSC’s vision is to be recognised by our stakeholders as the model international financial services regulator and its mission is to provide financial services regulation in an effective and efficient manner in order to promote good business, protect the public from financial loss and enhance Gibraltar’s reputation as a quality financial centre. The regulatory objectives underpin the vision and mission statement. Namely, these are the promotion of market confidence; the reduction of systemic risk; the promotion of public awareness; the protection of the good reputation of Gibraltar; the protection of consumers and the reduction of financial crime.
Gibraltar this week became the first jurisdiction in the world to offer a regulatory framework for distributed ledger technology [DLT], paving the way for the Rock’s drive into a fledgling but booming new area of business.
Distributed ledge technology, also known as blockchain, is the technology that underpins cryptocurrencies such asBitcoin but has many potential other uses, particularly in financial services. By becoming a pioneer in the regulation of DLT, Gibraltar hopes to attract reputable operators to the Rock in a sector defined by fast-paced innovation. Yesterday the Gibraltar Financial Services Commission [GFSC], which will oversee DLT operators in Gibraltar, confirmed it was already handling several applications from businesses seeking to be licenced here.
Nicky Gomez, Head of Risk and Innovation at the GFSC, would not be drawn on the exact number of applicants at this early stage but said there was a mix of business models hoping to be licenced. He said, “We are really excited to finally welcome applications from DLT Providers. The team expect to be very busy in the coming months, and are looking forward to working on some interesting and innovative ideas with applicants. Working closely and collaboratively with the financial services industry and the Government of Gibraltar has resulted in the GFSC becoming the first regulator to introduce a DLT Regulatory Framework – it is a very encouraging time and we are also looking forward to the challenge! Each case has a different selling point, there’s no two that are the same.”
The DLT regulatory framework came into effect on January 1 and means that Gibraltar-based firms using blockchain to store or transmit value belonging to others must now apply for a licence from the GFSC. The regulator said it was offering “an outcomes-focused, principles-based” regulatory framework for distributed ledger technology that is “objective, targeted and flexible”. The GFSC’s primary objective is to protect consumers and the reputation of Gibraltar when considering any licence application and in its supervision and enforcement functions. Its new DLT regulatory framework hinges on nine principles designed specifically for blockchain applications that companies must adhere to, namely: honesty and integrity; focus on the interests and needs of customers; maintain adequate resources; forward-looking risk management practices; protection of client assets and money; effective corporate governance; maintain high security access protocols; detect and disclose financial crime risks; and be resilient
The application process for DLT businesses is in three phases and starts with a pre-application engagement to assess the scope of the business and establish a relationship. The second phase is an initial application assessment during which the GFSC will assess, within a two week timeframe, the inherent risk and complexity of the proposed business and provide feedback ahead of the final stage. Once the applicant submits a full application, the GFSC will aim to review and provide a decision within two and a half months.
For further information on the GFSC’s DLT Regulatory Framework contact us at email@example.com and we will be in contact with you asap.