Gibraltar refreshes jurisdiction’s distributed ledger technology regulation
The Gibraltar Financial Services Commission (GFSC) has today announced a number of important updates to the jurisdiction’s bespoke Distributed Ledger Technology Providers (DLT) regulatory framework Guidance Notes.
Changes to the Guidance Notes have been made to capture a natural evolution of the defined regulatory principles. As was always envisioned, in a fast-moving industry the idea behind the Guidance notes accompanying the legislation was to be able to facilitate and capture this and maintain a framework that was directly relevant and up to date. As well as offering further clarity on key areas, the amended guidance notes also update the risk framework to distinguish between virtual assets and virtual asset denominated instruments that are arguably higher risk, and require additional factors or onboarding tests to be considered.
Continuation of work on the detailed process of fully adapting the framework to include the latest Financial Action Task Force (FATF) recommendations relating to virtual asset service providers (VASP) activities is also marked by the release of the updated guidance notes. The Government is also continuing with separate work, in engaging an international professional working group on the considerations and factors around the adoption of the Travel Rule requirements introduced for VASPs under the FATF recommendations
Gibraltar’s Minister for Digital and Financial Services, the Hon Albert Isola MP, said, “Today marks another milestone moment for Gibraltar’s thriving DLT/VASP ecosystem, as we refine the regulatory framework that guides companies through the licensing process and beyond. Our jurisdiction’s agility has been a hallmark of our success to date, with a progressive open dialogue between regulators and industry figures helping to craft a framework that satisfies natural regulatory prudence while allowing for a sensible amount of regulatory latitude to help projects innovate properly.”
The consultation process began last November and included the Gibraltar Financial Services Commission (GFSC), Gibraltar Association for New Technologies (GANT), and DLT Provider licensees who have been fully consulted on the amendments to the framework.
Introduced in January 2018, Gibraltar’s DLT legislation is the world’s first purpose-built regulatory framework for businesses using blockchain or DLT and sets out a rigorous application process in line with Gibraltar’s vision for the highest standards in regulatory adherence. DLT permission holders are subject to the same high supervisory standards as banks and other financial services firms.
Currently, there are 13 licensed firms operating under the DLT framework including large international groups such as eToro, Huobi, Xapo, LMAX, Bitso, and Gnosis (the full current list can be seen here https://www.fsc.gi/regulated-entities/dlt-providers-38). In addition, there are a number of active applications in process. Gibraltar has always aimed to open the door to those firms that reach or exceed the high entry threshold we have established and therefore grow a top-level industry and ecosystem. For companies seeking to obtain a DLT license, early engagement with the GFSC DLT & Markets team is essential to establish if the company’s proposed activity fits within the principles of the framework.
“Prospective licensees must demonstrate a clear appreciation of the nine core principles underpinning the regulatory framework, covering areas such as corporate governance, capital adequacy, risk management, customer care, and in due course, market manipulation. Other essential prerequisites include thorough internal risk management strategies, robust corporate governance structures, and well-defined protocols, with security checks in place to ensure the protection of clients’ assets is prioritized. With a finely tuned DLT regulatory framework informed by industry and market insights, Gibraltar is even more equipped to steadily broaden our DLT community and continue Gibraltar’s strong arc of economic growth post-pandemic and BREXIT. We look forward to welcoming more quality projects into our blockchain ecosystem in the months and years ahead,” concluded Minister Isola.
For further information on Gibraltar’s DLT regulatory framework and the revised guidance notes, visit gfsc.gi/dlt.
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