The British overseas territory of Gibraltar is planning to regulate the booming ICO market by setting guidelines on how to operate a blockchain business, thus becoming world’s first jurisdiction with a fully regulated initial coin offering exchange.
Gibraltar’s Financial Services Commission published its draft in early October and is also planning to make the regulatory rules effective from January 2018.
Speaking to the Gibraltar Chronicle after the release of the initial draft, Gibraltar’s Minister for Commerce, Albert Isola, said: “I am delighted and excited in equal measure to publish this legislation today, after an extended period of thinking, consultation and review with the industry and experts in this field.”
He added: “I am most grateful to the DLT Working Group, Sian Jones, Nicky Gomez and the team at the Gibraltar Financial Services Commission and to the individuals who have willingly shared their insight in the creation of this framework.”
Samantha Barrass, chief executive of the Gibraltar Financial Services Commission, said: “Today’s publication places Gibraltar at the forefront of the regulation of Distributed Ledger Technology businesses and is a wonderful example of what can be achieved through greater collaboration among industry, government and the regulator.”
The ICO market share is growing day-by-day as blockchain firms are finding it to be the easiest way to raise substantial funds. But with the boom, illicit activities have also increased. Moreover, the market is still unregulated as DLT technology makes it tough to have supervisory control over the market.
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As a result, we have seen many countries taking a stance against the ICOs, and countries like China and South Korea have even put a blanket ban on the market.
In this scenario, jurisdictions like Gibraltar are turning out to be safe havens for blockchain firms as the authorities welcome the booming ICO economy. With the regulations, it will provide a secure market for legit blockchain firms which are to aiming to evolve the existing technology.
Nick Cowen, CEO of GBX and also the founder and CEO Gibraltar Stock Exchange, said in an interview with IT Pro: “We have seen the default ICO space absolutely exploding…I’ve been doing this for 34 years, and I’ve never seen anything move quite so quickly as what we’re seeing in this space, which is good but also really worrying.”
He added: ”We said to ourselves: we’re in the business anyway of running a stock exchange, we understand rules, regulations, disclosure, we approve prospectuses everyday that comply with EU legislation – what if we brought that regulatory governance, ethics, expertise to this [ICO] space, in which we can’t see any?”
Gibraltar’s own cryptocurrency exchange, GBX, which is set to launch in January next year, will work on a sponsor-based model. New blockchain firms will have to sponsor other firms to get listed on the exchange. Also, in the early ‘boot camp’ stage, the firm and its technology will be thoroughly checked to ensure the efficiency of the firm’s business model.
Many other countries have been trying to regulate the ICO industry, at least partially. Singapore recently launched guidelines stating that it will see some ICOs as securities and will apply security market laws on them. The UAE is also trying to find an efficient way to regulate this volatile market.