The system applies to companies that offer financial services, meaning they transmit money or assets, through the use of Blockchain or distributed ledger technology (DLT). The British overseas territory sees this new regulatory system as a way to attract new fintech firms -- new Blockchain companies could boost the financial services industry after Brexit.
According to the GFSC’s head of risk and innovation, Nicky Gomez, the commission’s decision is in response to a need for regulatory framework in the Blockchain space, as voiced by companies themselves:
"This is the first instance of a purpose-built legislative framework for businesses that use Blockchain or distributed ledger technology. Many firms have been craving for a jurisdiction to regulate them."
On Dec. 15 the Gibraltar government published guidelines for companies on the implementation of the new law.
The law amends the Financial Services (Investment and Fiduciary Services) Act to include how to legally define how Blockchains can be utilized for data storage and transmission.
The territory’s legislature will next tackle the passage of a bill that is specifically intended to regulate DLT platforms. This will be followed by another bill that will regulate initial coin offerings (ICO).
According to the government’s senior advisor on DLT, Sian Jones, the new laws will enable business enterprises to create or open bank accounts more easily and strengthen their legitimacy with prospective clients.
Under the new rules, companies will be mandated to hold some capital in order to operate in the territory. The exact amount required, however, will be determined on a case-by-case basis. The companies will also be required to comply with anti-money laundering and terrorist financing laws to successfully establish their operations in the territory.
Gibraltar has previously been noted as a particularly Blockchain and crypto-friendly jurisdiction. The new legislation follows other tax and regulatory policies designed to attract businesses and investors in the crypto space.