15 Dec 2017
Gibraltar’s financial services watchdog will introduce the world’s first bespoke licence for “fintech” firms using blockchain distributed ledger technology from next month in a bid to attract start-ups to the British overseas territory as it prepares for Brexit.
The move is the first of its kind and would formally recognise the use of blockchain records as an accepted mechanism for transmitting payments, paving the way for broader adoption of what proponents call revolutionary technology and critics say is overhyped.
Many cities in Europe, the United States and Asia are vying for fintech business, and others have yet to take this regulatory step, largely because the adoption of blockchain, the technology behind cryptocurrencies such as bitcoin, is not systemically important enough to warrant specific regulation.
The Gibraltar Financial Services Commission (GFSC) will publish guidance on 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.
Other regulators in the United States and Japan have introduced rules focusing on cryptocurrencies or for the exchanges that trade them.
“Many firms have been craving for a jurisdiction to regulate them,” Gomez said.
Blockchain, which first emerged as the architecture underpinning cryptocurrency bitcoin, 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.
Last month American Express introduced instant blockchain-based payments using Ripple.
– By Huw Jones, REUTERS
Count this content towards your CPD minutes, by signing up to our CPD WalletFREE CPD Wallet