The Group has placed itself at the forefront of the current ‘frenzy’ of Fintech solutions, encompassing primarily the use of Gibraltar as a jurisdiction which is fast becoming the global pace-setter in this new growth-busting sector.
Our specialist team of lawyers, bankers, accountants and financiers can advise on all aspects of Blockchain, Token Sales (Initial Coin Offerings) and Crytocurrency, including taking clients through the entire licensing application process.
UNDERSTANDING GIBRALTAR’S Distributed Ledger Technology (DLT) REGULATORY FRAMEWORK
Innovation and flexibility are key in rapidly-moving present-day business environments. Not only do service providers need to ensure their adaptability, but so do regulators and governments more widely. With the recent boom in virtual currencies and the newly-found value attributed to DLT on a wider-scale, the indisputable reliance on the digital world and emerging technologies is now more than ever apparent.
The Gibraltar Financial Services Commission (“GFSC”) has, by adopting a flexible and business-focussed approach, succeeded in keeping Gibraltar at the forefront of the DLT world, whilst establishing its position as a ‘market-leader’ in the DLT regulatory realm.
Through the introduction of the FINANCIAL SERVICES (DISTRIBUTED LEDGER TECHNOLOGY PROVIDERS) REGULATIONS 2017, Regulation (LN. 2017/204) of Gibraltar (the “DLT Regulations”), which entered into force on 1st January 2018, entities “providing distributed ledger technology services” shall require licensing in Gibraltar.
Regulation 10 describes the “provision of DLT services” as “Carrying on by way of business, in or from Gibraltar, the use of distributed ledger technology for storing or transmitting value belonging to others”. It then continues to define “distributed ledger technology” or “DLT” as “a database system in which: information is recorded and consensually shared and synchronised across a network of multiple nodes; and all copies of the database are regarded as equally authentic” and defines “value” as including “assets, holdings and other forms of ownership, rights or interests, with or without related information, such as agreements or transactions for the transfer of value or its payment, clearing or settlement.”
A transitional period from 1st January 2018 to 31st March 2018 saw the continuation of trading by existing providers not yet licensed, conditional upon their seeking licensing by the 31st March 2018. Any other provider seeking to commence DLT related activities as of 1st January 2018, and falling within the above definitions and scope of the DLT Regulations, is required to obtain prior FSC approval and licensing, and must ensure satisfaction of the various requirements of the GFSC with respect to the same.
Applicability of the DLT Regulations however, not only requires providers to meet the criteria as set out within the DLT Regulations themselves, but also requires consideration of other licensing provisions applicable in Gibraltar, which may supersede the requirement for licensing under the DLT framework. Instances may also arise in which licensing under two or more regulatory regimes may be required, depending on the services to be provided and relevant set-up. It is therefore vital to fully understand the scope of all potentially applicable regulatory provisions and to seek legal advice to ensure licences are obtained accordingly.
The introduction of the DLT Regulations has proved an attractive proposition for a vast array of service providers with links to DLT, in that, being regulated in a highly-reputable jurisdiction like Gibraltar, provides them with a degree of credibility and re-assures potential investors and service-users as to their authenticity. The evident success associated with the DLT Regulations has fuelled the GFSC’s swift move ahead with a regime for initial coin offerings (“ICO”) which is currently at consultation stage and we expect to be implemented by Q4 of 2018.
Advising clients on the applicability of Gibraltar regulatory regimes, including the DLT Regulations, is at the core of the services provided by Perez Rodriguez Trenado, a long-established Gibraltar-based law firm associated with the Gibro Group. Having already driven DLT licensing applications, and following successful applications under various regulatory frameworks, Perez Rodriguez Trenado is well equipped to provide assistance to those looking to become licenced in Gibraltar and/or launch an ICO from within Gibraltar.
Please contact us for further information.