Our regulator, the Gibraltar Financial Services Commission (“GFSC”) licenses and oversees DLT businesses which:

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“Carry on by way of business, in or from Gibraltar, the use of distributed ledger technology for storing or transmitting value belonging to others.”

The DLT regulations were devised by the GFSC which has recognised that the framework must be responsive to new use cases of DLT and needs to be flexible enough to adapt to this rapidly changing technology. Gibraltar’s answer to this ever-changing landscape was to devise a framework based on ten key regulatory principles.

Although crypto exchanges are the ones making the most use of the Gibraltar DLT Provider licence, they are not the only type of business which can be regulated. Other examples of DLT business which may be regulated include:

• OTC trading platforms.
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• Crypto custodians and escrow service providers.
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• Centralised crypto scheme administrators (for example, loyalty points and in-game currencies).
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• B2B payment network operators.
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• Any company holding crypto or other digital assets, as a business, on behalf of others.

A DLT Provider is a provider of financial services. The application process is made to the Gibraltar Financial Services Commission (“GFSC”) and is akin to any financial services application. The main difference is that a DLT provider’s policies, procedures and operations will be centred around compliance with the 10 DLT principals which were designed to offer flexibility in the fast-changing blockchain and crypto space.

We are able to assist with the application for a DLT Provider Licence to the GFSC and the scope of our work will include:

• Review of business plan.
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• Advising on capital adequacy requirements. 
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• Drawing up corporate governance, anti-financial crime and customer due diligence policies.
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• Assistance with the completion of the GFSC application forms.
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• Assistance with opening a Gibraltar bank account.
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By becoming regulated in Gibraltar, DLT firms will benefit from the certainty that they are operating within the law. This will increase confidence in Gibraltar-licensed DLT firms and in the products and services provided by them. In this way, consumers can have faith in the integrity of their owners and managers. Regulation can also significantly enhance the appeal and marketability of DLT products.

The law establishes ten principles which DLT firms must adhere to. They are principles which all existing financial services firms will be very familiar with. The law requires DLT firms to:

1. Conduct their business with honesty and integrity.
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2. Pay due regard to the interests and needs of each and all its customers and communicate with them in a way that is fair, clear and not misleading.
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3. Maintain adequate financial and non-financial resources.
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4. Manage and control their business effectively, and conduct their business with due skill, care and diligence; including having proper regard to risks to its business and customers.
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5. Have effective arrangements in place for the protection of customer assets and money when they are responsible for them.
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6. Have effective corporate governance arrangements.
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7. Ensure that all of their systems and security access protocols are maintained to appropriate high standards.
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8. Have systems in place to prevent, detect and disclose financial crime risks such as money laundering and terrorist financing.
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9. Be resilient and have contingency arrangements for the orderly and solvent wind down of its business.
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10. A DLT Provider must conduct itself in a manner which maintains or enhances the integrity of any markets in which it participates.