A business-like approach to regulating digital assets is working for Gibraltar

In January 2018, Gibraltar became the first jurisdiction on the planet to pass into a law a regulatory framework to accommodate financial services based on blockchain. It has helped to attract to the Rock more than a dozen digital financial services companies, including crypto-currency funds and Insurtechs.

The government of Gibraltar and the Gibraltar Financial Services Commission (GFSC) pride themselves on their closeness and accessibility to the industry, which they believe encourages a spirit of openness among regulated firms, but they are not an easy touch: it can take 12 months to get approved, and more licence applicants are disappointed than endorsed. Dominic Hobson, co-founder of Future of Finance, spoke to the Honourable Albert Isola, Minister for Digital and Financial Services in Gibraltar, about what licence-seekers can expect and where he thinks the next big opportunities lie.

Questions that are being asked

1. What is the stance of Gibraltar towards crypto-currencies (Bitcoin, Ether etc.), especially in terms of investor protection?

2. Gibraltar has become an established crypto-currency fund domicile – 10% of global AuM according to PwC. How have you protected investors from such a volatile asset class – and was the Experienced Investor Fund (EIF) model a useful precedent?

3. One reason Gibraltar attracted crypto-currency funds was that it was one of the first jurisdictions to pass into a law a regulatory framework for Blockchain, back in January 2018. Has the law fulfilled your expectations in attracting business to Gibraltar?

4. Is there any pattern to the blockchain businesses you have attracted (for example, Gibraltar has an established profile in insurance and e-gaming)?

5. Crypto-currency has some obvious links to gaming. Is there an opportunity for Gibraltar in expectations of increased overlap?

6. How hard was it to pioneer a law in the area of Blockchain – presumably, there were no precedents?

7. Has the Blockchain Law evolved since 2018?

8. Are the Decentralized Finance (DeFi) markets a development to which Gibraltar will respond?

9. Are NFTs an opportunity for Gibraltar?

10. Gibraltar has a sizeable fund business. Does your private fund business offer an opportunity for tokenization?

11. What opportunities beyond funds do you see in tokenization?

12. How closely does the government work with the Gibraltar Association for New Technology (GANT)?

13. How closely linked is Gibraltar to the UK financial services industry, both formally (reciprocal access) and informally?

14. In business terms, has Brexit created more opportunities than problems (previously, Gibraltar did, like the UK, implement EU regulations)?

15. How will Gibraltar respond to the EU Markets in Crypto-assets Regulation (MiCA)?

16. MiCA is notably hostile to Stablecoins, because of the threat to bank funding. What is your view of Stablecoins?

17. Gibraltar has a close relationship with the pound sterling. What benefits do you think a sterling central bank digital currency (CBDC) would bring to Gibraltar?

18. The UK government introduced after Brexit the Gibraltar Authorization Regime (GAR) giving Gibraltar reciprocal access to UK financial services. How helpful has that been?

19. In terms of jurisdictions, where does Gibraltar find itself competing (I appreciate this must vary by business line, but I’m thinking of the Channel Islands, Bermuda, BVI, Cayman, Liechtenstein, Monaco, Malta, Cyprus, even Ireland or Luxembourg)?

20. Gibraltar makes much of its agile and accessible regulatory agency. Which regulatory models does the Gibraltar Financial Services Commission (GFSC) follow?

21. To what extent is your flexibility constrained by the recommendations and rulings of the Financial Action Task Force (FATF)?

22. What is the Legislative Reform Programme and why is it helpful?

23. Is lack of talent ever a problem for firms in Gibraltar?

24. Are there many synergies between the sectors – insurance, funds, gaming – in Gibraltar (e.g. insurance funds)?

25. Where are the big growth opportunities now – in funds, insurance, payments, private banking?