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ICO Jurisdiction: A New Lease for DLT in Gibraltar

Interview by Zoya Malik (TFT Managing Editor)

Nick Hughes, Managing Director, Eulat Consulting works closely with fintechs globally to expand their businesses. He spoke to Zoya Malik, managing editor TFT about the strengthening of Gibraltar’s regulatory framework that is ushering market confidence in the wake of Gibraltar Stock Exchange becoming the “first” stock exchange to own a regulated blockchain exchange, the GBX and his views on the local industry talent gap.

ZM: What is Gibraltar Financial Service Commission doing to create market confidence within Gibraltar’s financial sector and economy?

NH: Since 1st January 2018, any firm carrying out by way of business, in or from Gibraltar, the use of distributed ledger technology (DLT) for storing or transmitting value belonging to others (DLT activities), needs to be authorised by the Gibraltar Financial Services Commission (GFSC) as a DLT Provider. 

The DLT framework positions Gibraltar as a jurisdiction which facilitates innovation, whilst ensuring it continues to meet its regulatory and strategic objectives, and understands the modern need for robust and speedy interaction with regulators, in this fast moving area of business. A flexible, adaptive approach is required in the case of novel business activities, products, and business models. 

ZM: What is the current environment for fintechs for ‘ease of doing business’? What more is needed?

As part of the GFSC’s commitment to supporting both existing licensees and those looking to take their first steps into the financial services sector – either as a financial services firm or offering support to financial services firms – the GFSC has established the Innovate and Create Team.

The Innovate and Create Team is made up of a number of individuals from across the organisation and it has been set up to help encourage innovation by supporting those businesses looking to develop and introduce innovative ideas for financial products or services into the market.

ZM: What have been new regulations by GFSC during 2018 to address DLT, crypto exchanges and cryptocurrency?

NH: A DLT Provider:

  • must conduct its business with honesty and integrity needs to ensure that the information is presented in a way that is likely to be understood by the target customer and does not disguise, diminish or obscure important items, statements or warnings
  • must pay due regard to the interests and needs of each and all its customers and must communicate with its customers in a way which is fair, clear and not misleading
  • must maintain adequate financial and non-financial resources
  • must manage and control its business effectively, and conduct its business with due skill, care and diligence; including having proper regard to risks to its business and customers
  • must have effective arrangements in place for the protection of client assets and money when it is responsible for them
  • must have effective corporate governance arrangements 
  • must ensure that all systems and security access protocols are maintained to appropriate high standards
  • must have systems in place to prevent, detect and disclose financial crime risks such as money laundering and terrorist financing.
  • must be resilient and must develop contingency plans for the orderly and solvent wind down of its business

ZM: What skills gaps are there in talent and recruitment for the DLT and cryptocurrency industries? How does Gibraltar’s market provide for this gap? How best to incentivise talent in these industries?

NH: There is currently a skills shortage in the Gibraltar market for roles such as Compliance, Risk, Developers and Business Development. New companies are looking to cross-train employees from other prominent industries in Gibraltar such as Gaming and general financial services, or for more technical roles they are conducting international searches for the right candidate.

ZM: What will Gibraltar’s regulatory and market opportunities offer investors during 2019?

Gibraltar has been successful in attracting cryptocurrency businesses such as Etoro, Huobi, Xapo and Coinfloor. The blockchain platform from Gibraltar’s stock exchange also gained regulatory approval and several other licence applications are currently being reviewed.

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