by Abacus for The Fintech Times
An Exciting Destination
Gibraltar’s introduction of a DLT “Distributed Ledger Technology” legislative framework is an attractive option for high quality Fintech businesses wishing to promote legitimacy and inspire stakeholder confidence.
Gibraltar is leading the way in this area with the regulations coming into effect on the 1st of January 2018. They apply to any firm carrying out by way of business, in or from within Gibraltar, the use of distributed ledger technology for storing or transmitting value belonging to others (DLT activities) and will need to be authorised by the local regulator, the Gibraltar Financial Services Commission “GFSC”.
This framework was created in consultation with a panel of industry experts to ensure that it is well aligned to the nature of distributed ledger technology. This has resulted in a flexible principles based approach that acknowledges individual business models and the unique attributes of each Fintech business, whilst adhering to the high standards expected from all firms operating in Gibraltar.
Regulation vs Decentralisation
The legislation does not place restrictions on the advantages brought about by the blockchain technology, nor does it interfere with the decentralised concept on which this industry is founded. The aim of the legislation is to regulate DLT-related activities in order to create a safer environment for these firms to operate in, with a strong emphasis on consumer protection. The main focus is on integrity, corporate governance, risk management, protection of client assets and IT security. The firms that embrace this and are able to satisfy the regulatory requirements are likely to enjoy a competitive advantage in this fast moving industry.
In or Out of Scope?
All businesses considering applying for a GFSC DLT license must obtain a legal opinion from a Gibraltar legal adviser to determine whether they fall within the scope of the legislation. Fintech businesses that are not covered by the legislation may also consider operating from Gibraltar to benefit from the ever-evolving Fintech ecosystem that the jurisdiction has to offer, and will still require a legal assessment and opinion from a local lawyer to be able to incorporate a Gibraltar company and open a Gibraltar bank account. A legal adviser can assist with the DLT licencing requirements, advise on token sales and other applications which require licensing , such as e-money licenses.
Whilst ICOs are not captured under the current regulations, the Government of Gibraltar is working on the introduction of legislation on the sale, promotion and distribution of tokens. When implemented, it will be another innovative step that will add confidence and reassurance to what is perceived to be the riskiest part of the blockchain related industry.
The 9 Principles of Gibraltar’s DLT Regulation
A business must:
- Conduct its business with honesty and integrity
- Manage and control its business effectively, and conduct its business with due skill, care and diligence; including having proper regard to risks to the business and customers
- Ensure that all of its systems and security access protocols are maintained to appropriate high standards
- Pay due regard to the interests and needs of all its customers and, communicate in a way that is fair, clear and not misleading
- Have effective arrangements in place for the protection of customer assets and money when it is responsible for them
- Have systems in place to prevent, detect and disclose financial crime risks such as money laundering and terrorist financing
- Maintain adequate financial and non-financial resources
- Have effective corporate governance arrangements
- Be resilient and have contingency arrangements for the orderly and solvent wind down of its business
As a UK overseas territory, Gibraltar is a well-regulated jurisdiction and is proud of its reputation as a high quality international finance centre. In addition to the introduction of the DLT regulatory framework, Gibraltar enjoys a favourable corporate tax regime. Its system is a hybrid one that taxes individual Gibraltar tax residents on their worldwide earnings, but in the case of corporate bodies, their tax liability is based on earnings accrued and derived in Gibraltar only. The current rate of corporation tax is 10% and there are no VAT, capital gains, inheritance or gifts taxes in Gibraltar.
Gibraltar also offers a special tax status (Category 2 Status) for qualifying high net worth individuals with assets over £2m who relocate to Gibraltar. Based on current tax rules, successful applicants will have their Gibraltar income tax liability capped at under £30,000 per tax year, irrespective of their worldwide earnings.
It is recommended to seek professional tax advice tailored to individual circumstances.
Is Gibraltar on your shortlist?
Our service offering at Abacus Gibraltar
At Abacus, not only do we see the value in distributed ledger technology, we believe it has the potential to revolutionise industries and the core practices that we have become exceedingly dependent on. It is difficult not to get excited about a technology that has the ability to change the way we work for the better, and we want to be at the forefront of developments in order to assist and welcome to Gibraltar the entrepreneurs that will make this happen.
We can help determine whether Gibraltar may be a suitable jurisdiction for your business.
We have been incorporating and managing companies in Gibraltar as well as in other jurisdictions for over 40 years. Our expertise ranges from small start-ups to large complex corporate structures. We understand the Fintech industry is evolving at a super-fast pace and our aim is to provide an efficient and reliable service for your Gibraltar business start-up.
The process involves an initial enquiry to help us understand your business model and aspirations. We aim to provide you with the guidance required for a successful set-up in Gibraltar. Depending on the nature of the enquiry, we will work with our internal DLT team and our large external professional local network to assist you as required. We can procure a Gibraltar legal opinion from one of the legal advisers on our independent legal panel.
We will liaise with you and your lawyer in areas such as corporate governance, due diligence, raising business capital and structuring your new business for optimal tax efficiency. We may also be able to assist you with bringing your Fintech business to Gibraltar even if your Fintech business is out of scope of the current regulations.
Once you are ready to proceed, we can incorporate your Gibraltar company, provide corporate directors, registered office and secretarial services where required. We are an authorised intermediary for local banks and can facilitate the account opening process as well as undertake accounting services, payroll and all that is required to operate a compliant Gibraltar company.
Visit our website at www.abacus.gi/fintech for further information or contact us: