ONE THING IS CERTAIN – THERE IS A LONG WAY TO GO TOWARDS BRIDGING THE GAPING TRUST CHASM BETWEEN THE CRYPTOCURRENCY SPACE AND MASS MARKET ADOPTION.
The detail of the functionality of the token is a key consideration, as it is only on the basis of a case by case assessment of this functionality that a determination can be made on the legal nature of a token. This is, and should be for all token developers, a key part of the token launch process.
In the context of better defining the distinction and as part of continuing efforts to cement Gibraltar’s position as a centre of excellence for blockchain business, the Gibraltar Government, in association with the Gibraltar Financial Services Commission and the cryptocurrency working group (co-chaired by ISOLAS’ Joey Garcia), is working towards developing the regulatory framework for initial token offerings (‘ITOs’). In the race to become one of the first jurisdictions to create such an environment, Gibraltar has the advantage of having already taken an important first step in the process –the creation of a regulatory environment and wider eco-system for DLT providers.
The forthcoming ITO regulations will be built on the foundations of the principles-based regime announced earlier this year and contained in the Financial Services (Distributed Ledger Technology Providers) Regulations 2017 (‘the DLT regulations’). The DLT regulations seek to regulate only entities “carrying on by way of business, in or from Gibraltar, the use of DLT for storing or transmitting value belonging to others.”
Regulating on the basis of nine principles, in respect of which guidance notes are currently being drafted and should be public well before the DLT Regulations come into force on 1 January 2018, it is anticipated that the ITO regulations which will follow during 2018 will offer some legislative guidance as to what does and what doesn’t constitute a utility token.
Time will tell, in the context of the tokenisation of securities, whether the market will see the development of specific regulation for such tokenised ‘financial’ instruments and what, if any, advantages might be built in for their promoters. One thing is certain – there is a long way to go towards bridging the gaping trust chasm between the cryptocurrency space and mass market adoption. The development of certainty of definition is an important part of that process but, so too, is the deployment and successful management of a regulatory space where relative safety can be found by the many investors yet to be wooed by this new era in the story of financial investments.
Selwyn Figueras E:
selwyn.figueras@
isolas.gi T: 003 502 000 1892
25 | ADMISI - The Ghost In The Machine | November/December 2017
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