Paul Astengo, Senior Executive at the Gibraltar Finance Centre in response to recent articles about the regulation of Distributed Ledger Technology and cryptocurrencies
Distributed Ledger Technology (DLT) and cryptocurrencies have taken the world by storm as the future benefits of this technology are becoming more apparent. With people looking to future applications, Gibraltar took the bold step to be the first jurisdiction in Europe to regulate companies operating in this space. We have worked tirelessly with some of the best minds in the industry to create a regulatory framework that protects investors and safeguards the jurisdiction’s reputation yet gives operators the flexibility to grow and develop. It’s for this reason that it pains me to see other jurisdictions publishing parts of our regulations as their own without taking the time to understand the bigger picture. Taking elements of the framework is like putting the body of a Ferrari on the mechanics of a Smart car. It looks the part but doesn’t work as it was designed.
‘Frankenstein’ regulatory frameworks are an absolute minefield and although they may be appealing on the surface, the chances are that at some point down the line, both the jurisdiction and the private sector will find themselves in very hot regulatory water. This is why Gibraltar Finance, the Gibraltar Financial Services Commission and the Private Sector have worked so closely together to develop the DLT framework. We want to see the industry grow and we want to do it in a controlled and safe environment for all parties involved.
The reality is other jurisdictions are still months behind Gibraltar. We understand the work and time it takes to get this right. As they say, “imitation is the sincerest form of flattery”… but is it? Some financial centres have seen the success we have had in the DLT and crypto space and are looking to queue jump to get on the bandwagon. Those who pick and choose elements to attract quick business, fail to see what potential issues will arise. Even working with some of the best minds in the industry and having a brilliant relationship with the regulator, it has taken us close to 2 years to get to this stage. There is no quick and easy solution to well defined and considered regulation.
As a small jurisdiction, Gibraltar, in my opinion, is one of the safest, most dynamic and progressive places in the World and due to its location, it is also one of the most transparent adhering to 161 exchange of information mechanisms to the OECD standard with 108 countries and territories around the world. It has, and will continue, to attract quality operators in the insurance, gaming, finance and legal space and we will not compromise when it comes to DLT. We will not jeopardise quality over quantity. Our gaming industry is testament to who we are and how we operate – currently we have 30 companies in Gibraltar employing over 3,000 people. A company logo on a door and a server does not give you access to Gibraltar PLC – we have a vested interest in the companies operating from our territory and we expect them to have the same.
Gibraltar was the first mover into this space and as a result, we are currently processing the first tranche of license applications which launched in January this year, and we do not envisage these to be granted until the end of June/beginning of July as a result of the due diligence and robust regulation involved. We are also one of the most efficient, regulated and speedy jurisdictions in the world so the chances of any other jurisdiction implementing the framework and granting a license in less than 4-6 months is nigh impossible. Our framework is so robust that banks in Gibraltar are allowing crypto/DLT based companies to open up accounts with them which can be a huge challenge for operators.
In short, Gibraltar is at the centre of the DLT and blockchain regulatory World and we continue to attract high quality, serious, progressive operators who are leaders in their respective fields. We provide regulatory certainty, not a promise of some future status. Other jurisdictions may continue to take the easy route but we know that historically it does not bode well.
Prepared by Cal Ó Donnabháin