Global cryptocurrency markets are in constant states of shock and change, as large superpowers like China, Russia and South Korea each seek to change the apparent stance they have. At this tumultuous time, however, it is the small nation of Gibraltar that has stepped forward as the first to provide a complete regulatory framework in which DLT firms can operate. Digital Ledger Technology, upon which blockchain is based, lends itself to a whole host of new financial challenges when it comes to regulation. As the evolution of blockchain technology is very recent and constantly changing, it is hard for current financial institutions to adjust, and many nations are unsure of how to properly introduce legislation. Instead, many larger powers are turning to banning the use of cryptocurrencies rather than find a way to incorporate them. Without proper regulation in place, it becomes difficult for firms to operate, either because they are ousted by firms operating illegally, or that they are simply unable to identify legal grey areas. BTC-e is a prime example of a company who was able to operate illegally for six years and become responsible for more than $4 billion in laundered money. As a part of the regulation, the government has introduced nine governing principles by which all DLT firms must operate. Examples of these include the need to ensure effective protocol to prevent money laundering, have solvency plans to protect against customer losses, and an overall understanding that a need to protect customer assets is vital. As such steps are still very recent, all new firms will be reviewed and prepared on their protocol on a case-by-case basis. Gibraltar hopes that these steps will create a safe zone in which innovative firms can operate. In fact, to further encourage adoption of blockchain technology in startups, the government is set to introduce an “Innovate and Create Team”. This team will be responsible for discussing new business opportunities and offering support in establishing themselves in the marketplace.
The tiny British Mediterranean outpost of Gibraltar has become the first territory to provide a regulatory framework covering distributed ledger technology (DLT). On Wednesday, Gibraltar’s government announced that it had signed an agreement with blockchain startup Hyperledger, which will allow for the creation and use of digital currencies on its territory.