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GIBRALTAR: An Introduction

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Gibraltar Embraces FinTech 


Regulators across the world have been rattled by last year’s explosive growth and subsequent fall in the value of Bitcoin and other cryptocurrencies as well as by the vast amount of financing raised through initial coin offerings. As DLT and cryptocurrencies develop and become mainstream, many jurisdictions continue to explore and consider the best means by which to regulate this burgeoning sector. The absence of clear rules from regulators globally has made it much harder for the DLT industry to grow, as it has generated uncertainty amongst professional advisors and service providers.

Gibraltar has fast become one of the few jurisdictions of choice for Distributed Ledger Technology (“DLT”) businesses. Gibraltar is one of the few jurisdictions in the world where it is possible to open a bank account for DLT-related businesses, subject to full compliance with KYC, AML and CFT legislation.

With all the stability and gravitas of larger jurisdictions, but a fraction of the size, Gibraltar is a first class low-tax jurisdiction with an agility few other jurisdictions can match. These advantages, coupled with Gibraltar’s modern infrastructure and central time zone, make Gibraltar an ideal place from which to operate a FinTech business, headquarter a multinational group of companies, manage family wealth, hold assets or provide services internationally. It is therefore natural that entrepreneurs wishing to establish businesses would consider Gibraltar as a favourable end jurisdiction.

Distributed Ledger Technology (“DLT”) 

Over the last four years, Her Majesty’s Government of Gibraltar, together with the Gibraltar Financial Services Commission (the “GFSC”), has been focused on implementing a comprehensive regulatory framework to encourage the development of FinTech and DLT-related businesses on the Rock.

The introduction by HM Government of Gibraltar of the principles-based and outcomes-focussed DLT regulatory framework on 12th October 2017 was a markedly progressive milestone for the jurisdiction. It demonstrates Gibraltar’s desire to continue to lead the way in establishing a responsible but business-friendly environment that seeks to protect consumers, as well as safeguarding the jurisdiction’s economy and excellent reputation, whilst concurrently providing the required flexibility to encourage established businesses and start-ups alike in progressing their DLT business ventures.

The result is a set of regulations that is outcomes-focused and principles-based which perfectly strikes this balance. The Financial Services (Distributed Ledger Technology Providers) Regulations 2017 of Gibraltar largely came into force on the 1st of January 2018, and it represented one of the first regulatory frameworks in the world to regulate DLT business providers.

Any DLT provider who, by way of business uses distributed ledger technology to store or transmit value belonging to others, must abide by the following nine regulatory principles:

1. conduct its business with honesty and integrity;
2. pay due regard to the interests and needs of all its customers, and communicate in a way that is fair, clear and not misleading;
3. maintain adequate financial and non-financial resources;
4. manage and control its business effectively, and conduct its business with due skill, care and diligence, including having proper regard to risks to the business and customers;
5. have effective arrangements in place for the protection of customer assets and money when it is responsible for them;
6. have effective corporate governance arrangements;
7. ensure that all of its systems and security access protocols are maintained to appropriate high standards;
8. have systems in place to prevent, detect and disclose financial crime risks such as money laundering and terrorist financing; and
9. be resilient and have contingency arrangements for the orderly and solvent wind down of its business.

As a consequence of the business and regulatory certainty provided by the DLT regulatory framework, a number of high profile and international business, as well as some great start-ups, have chosen Gibraltar as their home to establish their DLT businesses and apply for DLT Providers Licences.

All DLT providers need to operate to the same high standards and expectations as firms who are currently licensed under existing financial services legislation. The principles are to be applied proportionately and on a risk-based approach. Their application will be objective and targeted, measurable and verifiable, and appropriate to activities performed, product, business model and risk factors. Since each DLT provider and its activities may be unique, the DLT principles have been designed to be flexible enough to be adapted to each firm’s characteristics and to its use of DLT.

Token Sales 

While the DLT regulations cover a licensing regime to intermediaries using DLT to store or transmit customer assets, they do not extend to the use of tokenised digital assets created and traded using distributed ledger technology (tokens) as a means of raising finance. The Government of Gibraltar therefore announced that it would introduce separate legislation to allow for the regulation of:

1. the promotion, sale and distribution of tokens by persons in or from Gibraltar;

2. secondary market activities relating to tokens, carried out in or from Gibraltar; and

3. the provision, by way of business, in or from Gibraltar, of investment advice relating to tokens.

The proposed token regulations will establish disclosure rules requiring adequate, accurate and balanced disclosure of information to anyone considering purchasing tokens, and measures to detect and prevent financial crime such as money laundering and terrorist financing. Industry best practices for the promotion and sale of tokens will also require to be complied with, including the auditing of smart contracts.

The token regulations will apply equally to ‘utility’ tokens and to ‘security’ tokens. As such, other EU legislative requirements, such as the need to publish a prospectus, may also apply unless certain exemptions may be relied on. Of course, any offer of ‘security tokens’ outside of the EU would require issuers to comply with the relevant laws and regulations in those jurisdictions where such tokens are being offered.

Cryptocurrency Funds 

A whole new set of challenges exist in relation to cryptocurrency funds, not the least of which is the volatility of cryptocurrencies themselves. Notwithstanding, there is a demand amongst investor communities to have exposure to this new, riskier asset class. The Gibraltar Funds and Investment Association (GFIA) has created a special crypto fund committee to specifically address many of these issues.

Gibraltar’s Experienced Investor Fund (“EIF”) regime has been the appropriate regulated vehicle to establish cryptocurrency funds. The infrastructure and the protections that the EIF regulations offer, along with the support of experienced EIF directors, fund administrators and auditors, has demonstrated the maturity and conscientiousness of Gibraltar’s funds industry towards the cryptocurrency market.

GFIA has also introduced a specific Code of Conduct for cryptocurrency funds. Among other matters, the code deals with the custody of cryptocurrencies, valuation, corporate governance and, of course, security. While it may be inevitable that some funds decrease in value as a result of fluctuations in the underlining cryptocurrencies, there is a desire to ensure that investors in Gibraltar cryptocurrency funds will be protected, in as much as they reasonably can be, from cybersecurity threats, operational security breaches and from risks associated with poor corporate governance. As a result, the interest in Gibraltar cryptocurrency funds has swelled and has reignited the interest in traditional securities funds and algorithm funds, including funds whose issued securities may be tokenised using DLT.


Cryptocurrency exchanges and custodian wallet providers are due to be brought within the scope of regulation at an EU law level. This will arrive in the form of the Fifth Money Laundering Directive (“MLD5”) which is a proposed EU Directive aiming to amend the Fourth Money Laundering Directive (“MLD4”). By way of background, MLD4 applies to a varied range of businesses deemed at risk of being involved in money laundering or terrorist financing.

The private sector in Gibraltar has, since the outset, been particularly sensitive to the requirements of MLD4 and MLD5 in the context of DLT businesses and dealing with cryptocurrencies. Whilst welcoming and quickly adapting to innovation, professional advisors and intermediaries in Gibraltar, including banks, have taken a robust and thorough approach to ensuring compliance with legislation, including undertaking chain analysis to ensure the cleanliness of cryptocurrencies and the wallets associated with them.


As developments with regard to DLT, the sale of utility tokens and Security Token Offerings, cryptocurrency funds and MLD5 progress and come into effect in the near future, Hassans will be well placed to continue to guide clients in the crypto space through the rapidly-evolving regulatory landscape.

Hassans is Gibraltar’s largest law firm has been consistently ranked as the leading law firm in Gibraltar by Chambers Europe and Chambers Global. The Hassans FinTech team consists of 15 experienced practitioners co-led by partners Vikram Nagrani and Anthony Provasoli. It is important to us that you get the best advice and in-depth industry experience we can provide. Should you have any queries on the regulatory regime in Gibraltar in relation to distributed ledger technology, please do not hesitate to contact any member of the Hassans FinTech Team.

Chapter overview written by Vikram Nagrani, Partner, Hassans International Law Firm, Gibraltar.