Gibraltar’s Bid to Become a Global FinTech Powerhouse

Gibraltar’s Bid to Become a Global FinTech Powerhouse

This article was kindly provided to BAB by James Lasry, President, AmCham Gibraltar. You can find out more about them here.

 

With a population of around 33,573 on an area of just 6.7 km², Gibraltar may be small, but that hasn’t stopped it make big headlines in recent months. The small British territory on the tip of the Iberian Peninsula launched their new DLT Regulations in January of this year, making it one of the first jurisdictions to do so. It will shortly follow up on this success with another FinTech breakthrough; the world’s first ever Token Sale regulations.

Gibraltar has a long and fascinating history spanning millennia. Its strategic position at the mouth of the Mediterranean has ensured its status as a vital trade and shipping hub since ancient times. Despite its often-turbulent history, this status has rarely faltered.

Today Gibraltar is the largest bunkering port in the Mediterranean and a key transit point for global shipping. It also plays host to many of the biggest names in insurance, finance and online gaming.

The favourable climate, meanwhile, attracts tourists in their droves; arriving by cruise liner, by air, or by land from neighbouring Spain. Though Gibraltar has much more to offer than warm sunshine.

With corporation tax of just 10% and no VAT, capital gains tax, inheritance or wealth tax, the jurisdiction presents plenty to entice businesses, investors and High Net Worth Individuals (HNWIs).  Add to this a solid reputation for strong regulation, a legal system based on English common law, robust, UK-standard infrastructure plus world-class fibre connectivity and it’s clear to see why the tiny British territory is booming.

Now, set against the backdrop of rapidly-sprouting office high rises, shimmering luxury developments and the iconic Rock itself, a new chapter in Gibraltar’s history is being written.

Gibraltar Regulates Distributed Ledger Technology

Gibraltar has rapidly become the jurisdiction of choice for the FinTech and blockchain industry in general, and crypto-entrepreneurs in particular. January’s landmark Distributed Ledger Technology regulations were the first step, introducing a key set of principals for blockchain/DLT businesses. This innovative principal-based approach was carefully crafted to ensure maximum regulatory oversight, without stifling innovation.

This development then paved the way for inauguration of a special Gibraltar Blockchain Exchange (GBX) which also launched its very own Rock Token (RKT), selling to the public in early February. Such was the excitement surrounding the event, it took only 9 seconds for the entire allocation of public sale tokens to sell out completely.

Next, in March, another key development; the government of Gibraltar published its first Token Regulations policy document, providing a clear regulatory framework for the world’s first token sale/ICO regulations. These regulations are set to come into effect in the second quarter of this year.

Gibraltar’s Token Regulations

As with the previous DLT Regulations, the Token Regulations will take a principal-based approach designed to encourage smart innovation and overall flexibility but with a strong emphasis on protecting consumers (not to mention safeguarding Gibraltar’s well-earned reputation within the financial community) through proper practices, conduct and full transparency.

Those who wish to promote and sell tokens will first need to meet very strict criteria, while being mentored by government-sanctioned “Authorised Sponsors”, a public register of which will be published and maintained by The Gibraltar Financial Services Commission (GFSC).

Word has begun to spread, with hundreds of applications currently pending (while many others are rejected off hand as unsuitable).

Meanwhile, two major Gibraltar-based banks have announced their intention to provide banking services for crypto operations, both for corporate and individual investor clients, with other major banks expected to follow soon after.

Crypto Funds

This latest development, combined with supporting regulation, makes Gibraltar the ideal jurisdiction for yet another fledgling industry, crypto funds. The Gibraltar Funds & Investments Association has therefore formed a special committee to carefully investigate this exciting new possibility and will soon make special amendments to its existing Code of Conduct.

Once again, the emphasis will be on protecting investors. The case for investing in crypto is clear, though, as this past year’s volatility has shown, the risks are equally palpable. These amendments will be specifically formulated to add extra layers of protection to investors. The GFIA also recommend that crypto funds be considered as Experienced Investor Funds (EIFs).

The Future

When it comes to driving success, Gibraltar has already proven itself time and time again. One need only look at Gibraltar’s most recent example, in the field of gaming, to see how a young industry can, through careful nurturing married with robust, common sense regulation, truly come into its own.

Not all that long ago online casino and betting businesses were viewed with suspicion, but no longer. Today online gaming is a massive, multi-billion industry with huge household-name brands sponsoring major sports teams. Gibraltar’s own regulatory contributions to the industry cannot be understated – there is a reason why all the biggest names in the industry are located in Gibraltar.

We fully expect the FinTech industry to follow suit, primarily to enjoy the financial benefits of Gibraltar, though also the multitude of aesthetic ones. With the imminent launch of the new Token Regulations Gibraltar will soon exit phase one of its crypto revolution, that of regulation, and inaugurate a new phase of innovation.

 

 

James Lasry, President, AmCham Gibraltar

James Lasry is the President of AmCham Gibraltar and a Partner at Hassans International Law Firm, the largest firm in Gibraltar. In addition to being the head of the Hassans’ Funds team, he is also a member of its special FinTech team, which advises international clients on crypto-related matters including investments and license applications. James has been ranked Band 1 by Chambers & Partners Europe Guide 2018 five years in a row.