Gibraltar Moves Toward World’s First ICO Regulations

The world’s first ICO regulations are coming, care of Gibraltar. The rapid global proliferation of initial coin offerings has become an issue of mounting concern among regulators and central banks around the world – in particular, the growth of ICOs has fueled massive growth in the cryptocurrency market in general.

What regulatory structures will be in place to contain the booming sub-segment of the economy, however, is still an emerging concern, with solutions ranging from outright bans in China to tightened securities regulations in the United States.

Initial coin offerings allow firms to raise initial funds in fiat currency, but offering investors tokens that can be traded for cash (at some future date) or different forms of cryptocurrency. Last year saw ICOs rake in a remarkable $3.7 billion, up from the approximately $80-$100 million raised the year before.

The explosion has sparked regulatory interest, and the Gibraltar Financial Services Commission (GFSC) has said that going forward, lawmakers will consider regulations governing the promotion, sale and distribution of tokens within the British overseas territory.

The GFSC said it would represent the world’s first set of bespoke rules for tokens.

“One of the key aspects of the token regulations is that we will be introducing the concept of regulating authorized sponsors, who will be responsible for assuring compliance with disclosure and financial crime rules,” said Sian Jones, a senior adviser to the GFSC.

The move comes as Gibraltar has been exploring ways to buttress and expand its financial services industry beyond gaming, particularly in light of the fact that Gibraltar will be exiting the EU along with its parent nation, Great Britain, in 2019.

Cryptocurrency has been an area of particular interest of late: In January, it issued the world’s first license for FinTech firms with a focus on leveraging the blockchain.

“We remain fully committed to ensuring that we protect consumers and the reputation of our jurisdiction,” said Albert Isola, Gibraltar’s commerce minister.

Gibraltar is also reviewing its rules for investment funds that involve cryptocurrencies and tokens.

And while Gibraltar is perhaps moving to be first out of the gate, they are certainly not the first to take an interest.

Earlier this week, Jay Clayton, head of the U.S. Securities and Exchange Commission, officially noted that tokens are securities and are subject to the same investor protection rules as share offerings.

Meanwhile, the finance ministers and central bank governors of France and Germany noted the need for greater oversight in the area.

“Tokens could pose substantial risks for investors and can be vulnerable to financial crime without appropriate measures,” they wrote.

“In the longer run, potential risks in the field of financial stability may emerge as well,” said the letter, calling on the Group of Twenty economies (G20) to discuss cryptocurrencies at their next meeting.


New PYMNTS Report: Preventing Financial Crimes Playbook – July 2020 

Call it the great tug-of-war. Fraudsters are teaming up to form elaborate rings that work in sync to launch account takeovers. Chris Tremont, EVP at Radius Bank, tells PYMNTS that financial institutions (FIs) can beat such highly organized fraudsters at their own game. In the July 2020 Preventing Financial Crimes Playbook, Tremont lays out how.