On January 2018, 1, the Distributed Ledger Technology Regulatory Framework issued by the Gibraltar Financial Services Commission (GFSC) officially came into effect:
1. The Act has a significant impact on the“Distributed Ledger Technology Providers”Defined as follows: In Gibraltar, a person who carries on businessStoring or transferring value based on distributed ledger technologyBusiness.
2. To operate such business, you need to apply to the Gibraltar Financial Services Commission (GFSC)DLT Providers LicenseThe Financial Services Committee will provide application guidance to applicants and assess the nature and complexity of the project being applied for.
This bill aims to promote the formulation of rules related to blockchain and cryptocurrency in order to achieve early regulation of emerging fields. At the same time, the legislature hopes to attract high-quality blockchain start-ups through clear supervision and guidance.
Distributed Ledger Technology Provider License
DLT Providers License
Scope of application
The DLT Regulatory Framework stipulates that regardless of the company's service direction, it must obtain a license when using DLT to transmit or store "value" belonging to others. Any company using blockchain technology or distributed accounting technology must apply for this license.
Such so-called distributed ledger technology providers includeVirtual CurrencyExchange, including providingSoftware and hardware wallets for storing virtual currenciesOrCryptocurrency ATMMachine, etc.
Companies that are suitable for applying for this license include, but are not limited to:
1. Companies that use blockchain technology to transmit or store data
2. Financial institutions or insurance companies using blockchain technology
3. Cryptocurrency Exchange
4. Cryptocurrency wallet
5. Cloud mining, cloud computing power, etc.
Regulatory principles
1. Honesty and Integrity:DLT service providers must operate with integrity and honesty, conduct due diligence on individuals who are prospective holders, financial directors or shareholders, and must not pose a risk to the public or the reputation of Gibraltar.
2. Customer Service:DLT service providers must provide high standards of customer service, ensure that all communications are clear and transparent, fully disclose the risks of interest, and promptly handle customer complaints.
3. Financial and non-financial resources:DLT service providers must maintainSufficient financial resourcesIn terms of non-financial resources, the DLT provider must ensure that it canComply with GFSC regulationsRequirements.
4. Risk Management:DLT service providers must adopt「Proactive risk management strategy」, with comprehensive risk management, including internal enterprise risk management framework, environmental control and management information system.
5. Customer assets:DLT service providers must take steps to protect customer assets and ensure they remainComplete and accurate transaction records.
6. Corporate Governance:DLT service providers must have effective corporate governance arrangements in place to establish the company’s operational and business oversight systems, including its structure, processes, culture and strategy.
7. Network security:DLT service providers must ensure that all systems and security access protocols are maintained to an appropriately high standard, with a focus on cybersecurity and preventing risks associated with IT vulnerabilities.
8. Financial Crimes:DLT service providers must comply with the 2015Proceeds of Crime Act (POCA)Conduct due diligence andKYCReview.
9. Emergency response capability:DLT service providers must be fully prepared for all possible contingencies to ensure that even in the event that the company winds down its business, the losses to customers are minimized.
application process
1. GFSC Risk Management Department meets with applicants to assess the application content in advance.
2. Preliminary review of application, stating reasons, business scope, business model, etc.
3. Initial assessment, pay approximately £2000 as assessment fee.
4. GFSC will classify applicants based on the information provided and estimate the required registration fees and annual fees.
5. Submit your application formally and pay the application fee.
6. Applicants are required to answer questions.
8. On-site inspection by regulatory authorities.
After submitting a complete application,GFSC will conduct interviews, including:
1. Background information of the company's core personnel, including personal skills and relevant experience
2. The company’s business plan, including company structure, products, services, target markets and strategies, etc.
3. Company financial budget
4. The company complies with nine regulatory rules
— Written at the end —
According to media reports, the Gibraltar Blockchain Exchange (GBX), a subsidiary of the Gibraltar Stock Exchange Group (GSX), and Huobi Gibraltar Affiliate have been granted a DLT license by the Gibraltar GFSC.
Subsequently, Gibraltar’s regulator may also formulate rules for ICOs. At the same time, the Gibraltar Financial Services Commission said it is considering a supplementary regulatory framework consistent with the DLT framework - ICO regulatory regulations, covering token promotion and sales activities.
According to GFSC officials in media interviews, Gibraltar’s proposed ICO legislation will become an element in a regulatory framework that will continue to evolve in tandem with the development of the blockchain and cryptocurrency industry.
