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Gibraltar has actively legislated to regulate the operation of cryptocurrencies within its jurisdiction.  It currently requires the registration of firms that use distributed ledger technology to store or transmit value belonging to others.  The registration process involves the Gibraltar Financial Services Commission reviewing the application and, if satisfied that certain criteria are met, a license may be granted, enabling the holder to operate a business using distributed ledger technology.  Gibraltar is also considering introducing regulations that will regulate initial coin offerings.

I. Introduction

The Gibraltar Financial Services Commission (GFSC) is the regulator of the financial services market in Gibraltar and is responsible for regulating providers of such services that conduct business in Gibraltar and overseas.  The GFSC must undertake this responsibility “in an effective and efficient manner in order to promote good business, protect the public from financial loss and enhance Gibraltar’s reputation as a quality financial centre.”[1]

Gibraltar has been considering regulating cryptocurrency for a number of years.  In 2014, the Cryptocurrency Working Group, a private initiative, was established to consider cryptocurrencies and, in January 2016, the government of Gibraltar and the working group joined together and issued a discussion paper that considered various types of regulations for this area.[2] 

The government recently introduced regulations governing the provision of distributed ledger technology (DLT)[3] and is currently in the process of introducing draft legislation to regulate initial coin offerings (ICOs).[4]

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II. Regulation of Distributed Ledger Technology

In May 2017, the government published a consultation paper discussing proposals for a regulatory framework covering DLT.[5]  In September 2017, the GFSC issued a statement that a new regulatory framework for DLT would be introduced and, on October 12, 2017, the government of Gibraltar introduced the Financial Services (Distributed Ledger Technology Providers) Regulations 2017[6] under the Financial Services (Investment and Fiduciary Services) Act.[7]  These regulations entered into force on January 1, 2018.[8]  The government of Gibraltar claims that the GFSC is the first regulator to introduce a framework regulating DLT.[9]  The aim of the legislation is to protect consumers, protect the reputation of Gibraltar as a well-regulated and safe environment for firms that use DLT, and enable Gibraltar to prosper from the use and growth of new financial technology.[10]

The regulatory framework covers firms that operate in or from Gibraltar and provide DLT services, defined in the Financial Services (Investment and Fiduciary Services) Act as “[c]arrying on by way of business, in or from Gibraltar, the use of distributed ledger technology for storing or transmitting value belonging to others.”[11]  The regulations require firms that meet these criteria to apply for a license from the GFSC to become a DLT provider.[12] 

In order to obtain a DLT provider’s license, a person must submit an initial application assessment request with a £2,000 fee[13] (approximately US$2,750) to the GFSC,[14] which must then

(a)     assess the nature and complexity of the requester’s proposed business model and of the products and services which the requester proposes to offer; and

(b)     provide the requester with an initial assessment notice informing the requester of–

(i)      any steps which the requester must take before applying for a DLT Provider's licence;

(ii)     the documents and other information which must accompany any application; and

(iii)    the prescribed fee which is payable.[15]

Upon receiving an application assessment notice from the GFSC, the person may then apply for a DLT Provider’s license conforming with the requirements of the notice and including an additional fee that ranges from £8,000 (approximately US$11,000) to £28,000 (approximately US$39,000), depending upon the complexity of the application, which is determined during the initial application assessment.[16]  The GFSC may issue the license if it is satisfied that the applicant will comply with nine regulatory principles,[17] which are contained in schedule 2 of the regulations and provide as follows: 

1. A DLT Provider must conduct its business with honesty and integrity.

2. 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.

3. A DLT Provider must maintain adequate financial and non-financial resources.

4. 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.

5. A DLT Provider must have effective arrangements in place for the protection of customer assets and money when it is responsible for them.

6. A DLT Provider must have effective corporate governance arrangements.

7. A DLT Provider must ensure that all of its systems and security access protocols are maintained to appropriate high standards.

8. A DLT Provider must have systems in place to prevent, detect and disclose financial crime risks such as money laundering and terrorist financing.

9. A DLT Provider must be resilient and have contingency arrangements for the orderly and solvent wind down of its business.[18]

In a paper discussing the introduction of these regulations, the government noted that, 

[i]n determining whether a principle is met, the GFSC will have regard to similarities in such matters as risk profile, use case, business model and product. The principles will be applied proportionately and on a risk-based approach.[19]

DLT license holders are further required to pay an annual fee, charged at a flat rate of £10,000 (approximately US$14,000), although an additional fee of up to £20,000 (approximately US$28,000) may be charged “depending upon the complexity of regulating the DLT Provider.”[20]  Companies that are currently licensed under the existing financial legislation in Gibraltar and use DLT to improve their procedures and processes do not need a separate license unless the activities that DLT is used for are not within the scope of the current license.  Banks that wish to provide virtual currency services and warrants need to obtain a new DLT license for these activities.[21] 

DLT providers are required to comply with the anti-money laundering and combatting terrorist financing requirements of Gibraltar, as well as those of any jurisdiction in which they also operate.[22]

Providing DLT services without a license under the regulations is an offense, punishable with a fine of up to £10,000.[23]

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III. Proposals to Regulate Initial Coin Offerings

The government of Gibraltar has expressed concern over the use of tokenized digital assets (tokens) and cryptocurrency given by companies to raise capital and bypass the traditional, regulated, capital-raising process required by financial institutions or venture capitalists.[24]  It is currently working to develop legislation to regulate the use of tokens, “essentially those created and traded using [DLT]”[25] that will align with the DLT regulations,[26] and expects a bill to be before Parliament by the second quarter of 2018.[27]

It has stated that “one of the key aspects of the token regulations is that we will be introducing the concept of regulating authorized sponsors who will be responsible for assuring compliance with disclosure and financial crime rules.”[28]  The regulations will cover the sale, promotion, and distribution of coins in Gibraltar, secondary market activities that involve tokens that are carried out in or from Gibraltar, the provision of investment advice connected to tokens, and measures to detect and prevent financial crimes.[29]  The laws will also include disclosure rules that must provide clear, concise, and balanced information to anyone who purchases the tokens.[30]

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Prepared by Clare Feikert-Ahalt
Senior Foreign Law Specialist
June 2018


[1] Press Release, GFSC, Distributed Ledger Technology (DLT) Regulatory Framework (Jan. 2, 2018), http://www.gfsc.gi/news/distributed-ledger-technology-dlt-regulatory-framework-270, archived at https://perma.cc/7DPW-ANKK.

[2] Press Release, HM Government of Gibraltar, Government Confirms Introduction of Government Confirms Introduction of Confirms Introduction of Distributed Ledger Technology (DLT) Regulatory Framework in January 2018, No. 610/2017 (Oct. 12, 2017), http://www.fsc.gi/uploads/GoGPR12102017.pdf, archived at https://perma.cc/LV7Y-2B59.

[3] “Distributed ledger technology” is defined in the Financial Services (Investment and Fiduciary Services) Act 1989, Act No. 49-1989, sched. 3 ¶ 10(2), http://www.gibraltarlaws.gov.gi/articles/1989-47o.pdf, archived at https://perma.cc/MUK3-5Q3T, as “a database system in which – (a) information is recorded and consensually shared and synchronised across a network of multiple nodes; and (b) all copies of the database are regarded as equally authentic; and ‘Value’ includes assets, holdings and other forms of ownership, rights or interests, with or without related information, such as agreements or transactions for the transfer of value or its payment, clearing or settlement.”

[4] Statement on Initial Coin Offerings, GFSC (Sept. 22, 2017), http://www.gfsc.gi/news/statement-on-initial-coin-offerings-250, archived at https://perma.cc/CN3Z-A9AS.

[5] HM Government of Gibraltar et al., Proposals for a DLT Regulatory Framework 18 (Published for public consultation, May 2017), http://www.gibraltarfinance.gi/downloads/20170508-dlt-consultation-published-version.pdf?dc_%3D1494312876, archived at https://perma.cc/K36X-47YD.

[6] Financial Services (Distributed Ledger Technology Providers) Regulations 2017, Legal Notice No. 204/2017, Gibraltar Gazette No. 4401 (Oct. 12, 2017), http://www.gfsc.gi/uploads/DLT regulations 121017 (2).pdf, archived at https://perma.cc/QG2W-8TQ6.

[7] Financial Services (Investment and Fiduciary Services) Act 1989, §§ 5, 7, 53, 56.

[8] Financial Services (Distributed Ledger Technology Providers) Regulations 2017, reg 1(2).  See also Press Release, GFSC, supra note 1.

[9] Press Release, GFSC, supra note 1.

[10] Id.

[11] Financial Services (Investment and Fiduciary Services) Act, sched. 3, ¶ 10.

[12] Distributed Ledger Technology Regulatory Framework (DLT Framework), GFSC, http://www.gfsc.gi/dlt (last visited Apr. 30, 2018), archived at https://perma.cc/L753-37RN.

[13] Financial Services Commission (Fees) Regulations 2016, LN 2016/071, sched. 2, http://www.gibraltar laws.gov.gi/articles/2016s071.pdf, archived at https://perma.cc/7KHF-LXNJ

[14] GFSC, DLT Application Process and Fee Structure (Oct. 4, 2017), http://www.fsc.gi/uploads/DLT Application Process and Fee Structure Public.pdf, archived at https://perma.cc/96VL-T4TJ.

[15] Financial Services (Distributed Ledger Technology Providers) Regulations 2017, reg 4(2).

[16] Financial Services Commission (Fees) Regulations 2016, sched. 2.

[17] Financial Services (Distributed Ledger Technology Providers) Regulations 2017, regs 4(3) & 5(1).

[18] Id.

[19] HM Government of Gibraltar et al., supra note 5.  Further guidance on the principles is available at Distributed Ledger Technology Regulatory Framework (DLT Framework), GFSC, http://www.fsc.gi/dlt?print (last visited Apr. 30, 2018), archived at https://perma.cc/6T44-CNT3.

[20] Financial Services Commission (Fees) Regulations 2016, LN 2016/071, sched. 1, http://www.gibraltarlaws. gov.gi/articles/2016s071.pdf, archived at https://perma.cc/7KHF-LXNJ

[21] Distributed Ledger Technology Regulatory Framework (DLT Framework), supra note 19.

[22] Id.

[23] Financial Services (Penalty Fees) Regulations 1993, LN 1993/147, sched., http://www.gibraltarlaws.gov.gi/ articles/1993s147.pdf, archived at https://perma.cc/A58V-PQ2C.  

[24] Statement on Initial Coin Offerings, GFSC (Sept. 22, 2017), http://www.fsc.gi/news/statement-on-initial-coin-offerings-250, archived at https://perma.cc/HD3M-N6UB.

[25] Press Release, HM Government of Gibraltar and Ministry of Commerce, HM Government of Gibraltar and the Gibraltar Financial Services Commission Announce Plans for Token Legislation (Feb. 12, 2018), http://www.gfsc.gi/news/hm-government-of-gibraltar-and-the-gibraltar-financial-services-commission-announce-plans-for-token-legislation-272, archived at https://perma.cc/9FVC-L4Z8.

[26] Distributed Ledger Technology Regulatory Framework (DLT Framework), supra note 19.

[27] Press Release, HM Government of Gibraltar and Ministry of Commerce, supra note 25.

[28] Id.

[29] Id.

[30] Huw Jones, Gibraltar Moves Ahead with World’s First Initial Coin Offering Rules, Reuters (Feb. 8, 2018), https://www.reuters.com/article/us-gibraltar-markets-cryptocurrencies/gibraltar-moves-ahead-with-worlds-first-initial-coin-offering-rules-idUSKBN1FT1YN, archived at https://perma.cc/LV7Y-2B59.

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Last Updated: 06/15/2018