Token sales in Gibraltar must…

Blockchain/Distributed Ledger Technology Providers [1]

• On 12 October 2017, the Government of Gibraltar released the draft regulations Financial Services (Distributed Ledger Technology Providers) Regulations 2017 which will come into effect on 1 January 2018 and initial applications are already permitted by the Gibraltar Financial Services Commission
  • These regulations make providing a distributed ledger technology services a controlled activity and provide grounds for issuing a “DLT Provider’s license” means a license granted under section 8 of the Principal Act to carry on the controlled activity of providing distributed ledger technology services
  • These regulations apply to the activities of firms, operating in or from Gibraltar, that use DLT to store or transmit value belonging to others, such as virtual currency exchanges [2]
  • These regulations focus on nine core regulatory principles which each licensee must adhere to:
    • A DLT Provider must conduct its business with honesty and integrity
    • A DLT Provider must pay due regard to the interests and needs of each and all its customers and must communicate with them in a way that is fair, clear and not misleading
    • A DLT Provider must maintain adequate financial and non-financial resources
    • A DLT Provider must manage and control its business effectively, and conduct its business with due skill, care and diligence; including having proper regard to risks to its business and customers
    • A DLT Provider must have effective arrangements in place for the protection of customer assets and money when it is responsible for them
    • A DLT Provider must have effective corporate governance arrangements.
    • A DLT Provider must ensure that all of its systems and security access protocols are maintained to appropriate high standards
    • A DLT Provider must have systems in place to prevent, detect and disclose financial crime risks such as money laundering and terrorist financing
    • A DLT Provider must be resilient and have contingency arrangements for the orderly and solvent wind down of its business
  • Notes on these regulations:
    • Once these regulations are put into effect, Gibraltar would be among the few jurisdictions worldwide to offer a fully regulated framework for firms working with blockchain[3]
    • Gibraltar plans to provide more guidelines in early 2018 to attract ICOs [4]
  • Repercussions for operating without a license fines according to the Financial Services Penalty Fees Regulations 1993 level 5. Further reprecussions have not yet been specified.

Token Sales [2]

• A September 22, 2017 statement from the Gibraltar Financial Services Commission (GFSC) on September 2017 highlights the lack of current regulation of token sales in Gibraltar
• This statement also noted the new DLT regulatory framework introduced above and mentioned that Gibraltar is “considering a complementary regulatory framework covering the promotion and sale of tokens, aligned with the DLT framework”
• As part of the same statement the GFSC issued a warning to people considering investing in tokens: “understand that tokens and ICOs are unregulated”
• Given the GFSC statements above, some Gibraltarian experts are of the view that it is entirely reasonable to expect that the current ‘DLT Principles’ may be extended and applied to token promotion and sales activities

Digital Proof

• No specific laws related to Digital Proof were found

SOURCES
[1] Gibraltarlaws.gov
[2] GFSC Statement
[3] Coindesk.com
[4] Fourtune.com