Gibraltar Regulator Refreshes Jurisdiction’s Distributed Ledger Technology Regulation

PRESS RELEASE No. 631/2020 Date: 17th September 2020

Gibraltar Regulator Refreshes Jurisdiction’s Distributed Ledger Technology Regulation Gibraltar – September 17th, 2020 – The Gibraltar Financial Services Commission (GFSC) has today announced a number of important updates to the jurisdiction’s bespoke Distributed Ledger Technology Providers (DLT) regulatory framework Guidance Notes.

Changes to the Guidance Notes have been made to capture a natural evolution of the defined regulatory principles. As was always envisioned, in a fast moving industry the idea behind the Guidance notes accompanying the legislation was to be able to facilitate and capture this and maintain a framework that was directly relevant and up to date. As well as offering further clarity on key areas, the amended guidance notes also update the risk framework to distinguish between virtual assets and virtual asset denominated instruments that are arguably higher risk, and require additional factors or on-boarding tests to be considered.

Continuation of work on the detailed process of fully adapting the framework to include the latest Financial Action Task Force (FATF) recommendations relating to virtual asset service providers (VASP) activities is also marked by the release of the updated guidance notes. The Government is also continuing with separate work, in engaging an international professional working group on the considerations and factors around the adoption of the Travel Rule requirements introduced for VASPs under the FATF recommendations Gibraltar’s Minister for Digital and Financial Services, the Hon Albert Isola MP, said, “Today marks another milestone moment for Gibraltar’s thriving DLT/VASP ecosystem, as we refine the regulatory framework that guides companies through the licensing process and beyond. Our jurisdiction’s agility has been a hallmark of our success to date, with a progressive open dialogue between regulators and industry figures helping to craft a framework that satisfies natural regulatory prudence while allowing for a sensible amount of regulatory latitude to help projects innovate properly.”

The consultation process began last November and included the Gibraltar Financial Services Commission (GFSC), Gibraltar Association for New Technologies (GANT), and DLT Provider licensees who have been fully consulted on the amendments to the framework.

Ministry of Digital and Financial Services HM Government of Gibraltar • Suite 771 Europort • Gibraltar GX11 1AA t +350 20068052 f +350 20047677 e mc@gibraltar.gov.gi w gibraltar.gov.gi

Introduced in January 2018, Gibraltar’s DLT legislation is the world’s first purpose-built regulatory framework for businesses using blockchain or DLT and sets out a rigorous application process in line with Gibraltar’s vision for the highest standards in regulatory adherence. DLT permission holders are subject to the same high supervisory standards as banks and other financial services firms.

Currently there are 13 licenced firms operating under the DLT framework including large international groups such as eToro, Huobi, Xapo, LMAX, Bitso and Gnosis (the full current list can be seen here https://www.fsc.gi/regulated-entities/dlt-providers-38). In addition, there are a number of active applications in process. Gibraltar has always aimed to open the door to those firms that reach or exceed the high entry threshold we have established and therefore grow a top-level industry and ecosystem. For companies seeking to obtain a DLT licence, early engagement with the GFSC DLT & Markets team is essential to establish if the company’s proposed activity fits within the principles of the framework.

“Prospective licensees must demonstrate a clear appreciation of the nine core principles underpinning the regulatory framework, covering areas such as corporate governance, capital adequacy, risk management, customer care, and in due course, market manipulation. Other essential prerequisites include thorough internal risk management strategies, robust corporate governance structures, and well-defined protocols, with secure checks in place to ensure the protection of clients’ assets is prioritised. With a finely tuned DLT regulatory framework informed by industry and market insights, Gibraltar is even more equipped to steadily broaden our DLT community and continue Gibraltar’s strong arc of economic growth post-pandemic and BREXIT. We look forward to welcoming more quality projects into our blockchain ecosystem in the months and years ahead,” concluded Minister Isola.

For further information on Gibraltar’s DLT regulatory framework and the revised guidance notes, please visit http://www.gfsc.gi/dlt. ### Minister for Digital and Financial Services, The Hon Albert Isola MP, is available for interview.

About Gibraltar A British Overseas Territory, Gibraltar is a self-governing and self-financing democracy that has established itself globally as a reliable centre for the blockchain and digital assets industry. In January 2018, Gibraltar became the very first jurisdiction globally to introduce legislation around Distributed-Ledger-Technology (DLT), and has since asserted its position as a leading blockchain and virtual assets hub. With Gibraltar’s core values of regulation, reputation, and speed to market at the foundation of its efforts within the blockchain industry, Gibraltar is now globally renowned for its commitment to creating a sustainable and secure regulatory framework for DLT, as well as being one of the leading proponents in the advancement of the technology.

For more information please visit http://www.gibraltarfinance.gi/en/home The Hon Albert Isola MP, Minister for Digital and Financial Services, HM Government of Gibraltar The Hon Albert Isola MP is Gibraltar’s Minister for Digital and Financial Services, with the primary responsibility of raising Gibraltar’s profile as a well-regulated commercial centre. He has specific 2

responsibility for financial services, digital technology innovation, and online gaming. Minister Isola previously served as Gibraltar’s Minister for Commerce where he played a central role in driving the creation of the world’s first purpose-built DLT regulatory framework, which became law in January 2018 for firms using blockchain to store or transfer value belonging to others. He is responsible for financial services policy, product development, and responding to international initiatives such as international tax compliance and exchange of information.

Minister Isola also led in the creation and establishment of the Gibraltar International Bank, a first for Gibraltar as a home-grown full-service credit institution. The Bank has been in operation since May 2015.

Before entering politics Minister Isola enjoyed an extensive legal career, serving as a Partner at a major Gibraltar international law firm, ISOLAS, where he specialised in all aspects of property development and its financing and led the Financial Services team. He also regularly acted as an adviser to the Financial Services Commission.

Media Contact: Eleanor McGovern — Consultant Wachsman E: eleanor.mcgovern@wachsman.com P: +353 87 933 7769

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