Distributed Ledger Technology Licensing Services
Gibraltar leads the way in the regulation of DLT
On the 1st January 2018, the Financial Services (Distributed Ledger Technology Providers) Regulations 2017 came into force which described Distributed Ledger Technology business as follows:
“Carry on by way of business, in or from Gibraltar, the use of distributed ledger technology for storing or transmitting value belonging to others.”
BENEFITS OF A DLT LICENSE
What are the pros of obtaining a DLT License?
A regulated DLT provider in Gibraltar will benefit from the certainty that they are operating within the law. Consumers will have more faith in the integrity of their owners and managers and in their ability to operate the business, thereby increasing consumer confidence over their products and services. DLT business in Gibraltar is overseen by the Gibraltar Financial Services Commission (“GFSC”).
DLT LICENSE APPLICATION
How to obtain a DLT License?
There are a number of important steps involved before a successful receipt of a Distributed Ledger Technology (DLT) License from the GFSC;
Pre-application engagement: Initial contact will need to be made with the GFSC in order to describe the application proposal, business model and type of activity and/or services the firm wishes to provide in, or from within Gibraltar.
Initial application assessment process: An email will need to be sent to the GFSC describing certain details about the Company’s business model, which will allow them to assess the risk profile of the proposed activity. Our prior experience shows that having a business plan in place by then will assist the process. A pre-application fee of £2,000 will be required in order to proceed.
Full application: The full application will need to be filed, along with a large range of accompanying documents taking into account the spirit of the 9 regulatory principles described below. The full application fee will need to be paid. This will depend on the complexity of the firm’s business model, categorised by the GFSC.
Individual interviews: Each role holder and key member of staff will be required to undertake a formal interview process with the GFSC.
Presentation: The presentation will be an integral part of the authorisations process and will give the applicant an opportunity to demonstrate how they will meet the GFSC’s regulatory requirements & principles.
In-principal license: If the GFSC is satisfied, an in-principle license will be issued via letter, which will describe the final points to be cleared before the license can be issued in full.
On-site visit: An onsite visit will be made, which gives the firm the opportunity to evidence to the GFSC that the processes and controls implemented and communicated during the presentation are effective and work in practice.
DLT REGULATORY PRINCIPLES
What are the 9 DLT Regulatory Principles?
Gibraltar-regulated Digital Ledger Technology businesses must:
1. Conduct their business with honesty and integrity.
2. Pay due regard to the interests and needs of each and all its customers and communicate with them in a way that is fair, clear and not misleading.
3. Maintain adequate financial and non-financial resources.
4. Manage and control their business effectively, and conduct their business with due skill, care and diligence; including having proper regard to risks to its business and customers.
5. Have effective arrangements in place for the protection of customer assets and money when they are responsible for them.
6. Have effective corporate governance arrangements.
7. Ensure that all of their systems and security access protocols are maintained to appropriate high standards.
8. Have systems in place to prevent, detect and disclose financial crime risks such as money laundering and terrorist financing.
9. Be resilient and have contingency arrangements for the orderly and solvent wind down of its business.
More detail on the above principles and the expectations of the GFSC are set out in the DLT Guidance Notes issued by them which can be viewed at : www.gfsc.gi/dlt.
What can our team offer you?
Our Senior Management has a number of years of experience in the fintech space, particularly in blockchain. Our experts have gone through numerous DLT license applications and will be able to support and guide you through the entire process.
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