The Gibraltar Financial Services Commission (GFSC) will start accepting applications for the license from next month, according to a report by Reuters. The GFSC will provide guidance that explains how its new blockchain regulations should be applied to fintech firms.
Under the legislation, providers will be able to fulfil a similar role to regular banks. They’ll be able to offer blockchain-based finance services that include transfers and storage of digital assets. The law, introduced as an amendment to the Financial Services (Investment and Fiduciary Services) Act, will provide a legal definition of how blockchains can be used to manage financial data.
Startups that apply for the license will be made to follow strict anti-money laundering and terrorist financing regulations. Firms must be able to demonstrate they have adequate IT protections to ensure they can comply with the rules. This will help to address some common concerns around the potential side-effects of blockchain adoption.
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If they comply with the regulations, startups will benefit from two main advantages. Firstly, Gibraltar will make it easier to obtain a bank account for the operation of the business. Firms will also have a firm legal footing that could increase their credibility and make them more attractive than international counterparts. Gibraltar expects companies numbering in the “double digits” to apply in January.
Gibraltar’s one of a growing number of regions vying for attention from fintech firms. Competition is growing across the world as more countries start to open up to the possibilities of blockchain tech. Gibraltar’s viewing fintech as a way to continue growing its financial services industry after Brexit in 2019. According to the GFSC, the new license has been developed in response to requests from fintech firms looking for a region that provides blockchain regulation.
“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, said to Reuters. “Many firms have been craving for a jurisdiction to regulate them.”
Blockchain technology is growing as fintech firms use it to develop new finance solutions that are faster and more transparent. Its distributed ledger allows international payments to be made in minutes by making it easier for transactions to be independently verified. The concept’s also growing outside of finance as more businesses use blockchains to store and share data.
