Gibraltar Updates DLT Regulation to “Capture a Natural Evolution” of Digital Assets

The Gibraltar Financial Services Commission (GFSC) reports that it is updating its regulatory approach pertaining to Distributed Ledger Technology Providers (DLT). Gibraltar describes the update as a “natural evolution of the defined regulatory principles.”

Gibraltar was quick to embrace digital assets – both securities and cryptocurrencies. The GFSC says that it was always envisioned that blockchain-based assets is a “fast-moving industry” that requires agility.

The amended guidance notes also update the risk framework to distinguish between virtual assets and virtual asset denominated instruments that are higher risk, and require additional factors or on-boarding tests to be considered, says the GFSC.

The update includes the latest Financial Action Task Force (FATF) recommendations relating to virtual asset service providers (VASPs) and affiliated Travel Rules requiring VASPs to capture and maintain trading data.  The Gibraltar government is working on engaging an international professional working group on the considerations and factors around the adoption of the Travel Rule requirements.

Gibraltar’s Minister for Digital and Financial Services, the Hon Albert Isola MP, issued the following statement on the change:

“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 consulted on the amendments to the framework.

Currently, Gibraltar reports 13 licensed firms operating under the DLT framework including firms like eToro, Huobi, Xapo, LMAX, Bitso and Gnosis as well as a number of firms engaged in the licensing process.

Minister Isola says that aspiring licensees must demonstrate a clear appreciation of the core principles underpinning the regulatory framework, including governance, capital adequacy, risk management, and market manipulation.

“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,” said Minister Isola.

 

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