Gibraltar financial watchdog to introduce blockchain licence
News on 15 Dec 2017
News on 15 Dec 2017
The Reuters news agency reports that Gibraltar could be the first jurisdiction in the world to issue a bespoke financial licence for fintech firms using blockchain distributed ledger technology.
The jurisdiction’s financial services regulator will make the licences available from January 2018 in a bid to attract start-ups to the British overseas territory, Reuters reports, noting that the initiative is a first in the world of finance to formally recognise the use of blockchain records as an accepted mechanism for transmitting payments.
The Gibraltar Financial Services Commission (GFSC) will publish guidance today (Friday) for applying its new law for firms that use blockchain to “transmit or store” cash and assets belonging to others – much in the same way as a bank is authorised.
“This is the first instance of a purpose-built legislative framework for businesses that use blockchain or distributed ledger technology,” Nicky Gomez, the GFSC’s head of risk and innovation, told Reuters.
“Many firms have been demanding a jurisdiction to regulate them,” Gomez said.
The Gibraltar guidance supplements nine “principles” contained in Gibraltar’s new blockchain law that will require a firm to hold capital, the amount decided on a case-by-case basis. Firms will have to treat customers fairly, and must have adequate IT systems and controls to comply with anti-money laundering and terrorist financing rules.
Blockchain is a shared electronic database that updates itself in real time and can process and settle transactions in minutes using cryptographic computer algorithms with no need for third-party verification.
Financial technology or fintech start-ups are using blockchain to offer services like payments and recording transactions, potentially putting themselves in direct competition with banks.
Reuters notes that last month American Express introduced instant blockchain-based payments using Ripple, a fintech start up, marking one of the first major users of the technology. Twenty-two of the world’s biggest banks and fintech firm R3 have just developed an international payments system using blockchain.
Sian Jones, a senior advisor on to the regulator and Gibraltar government, told Reuters that there will be two main advantages to firms being authorised under the new rules: it will make it easier to obtain a bank account to run the business, and it helps a business gain legitimacy with customers.
