Token sales and regulations in Gibraltar

ICO/Token Sale Regulations in GibraltarGibraltar’s stature as a leading global FinTech jurisdiction has taken another huge step forward this month with the publication of the official Gibraltar Finance Token Regulation Policy Document.

While the January 2018 DLT regulations provided a strong regulatory framework for distributed ledger technology-based businesses, these new token sale regulations will be specifically aimed at businesses looking to raise capital through token sales.

Gibraltar’s Token Regulations are scheduled to come into effect in the second quarter of this year, thus creating a fully-regulated market for token sales, ICOs and other crypto and blockchain-based operators looking to raise capital.

This landmark piece of legislation will strike the perfect balance between regulation and innovation, with robust consumer and investor protection on the one side, flexibility and ingenuity on the other.

How Gibraltar’s Token Regulations will work

The British territory of Gibraltar was among one of the first jurisdictions to recognise the massive potential of crypto asset classes such as tokens, while also anticipating the markets’ need and desire for careful, yet flexible, regulation.

The proposed regulations build upon Gibraltar’s solid reputation as a trusted financial market, advocating smart ideas, solid financials, tough security and the utmost integrity, while also providing ample space for the next wave of crypto pioneers to evolve and thrive.

Token Regulation focus

The primary focus of these new Token Regulations are as follows:

  • the promotion, sale and distribution of tokens;
  • the operation of secondary market platforms trading in tokens; and
  • the provision of investment and ancillary services relating to tokens

[Source: http://gibraltarfinance.gi/20180309-token-regulation—policy-document-v2.1-final.pdf]

Taking each in turn:

The promotion sale and distribution of tokens: Here the regulations are concerned with the adequate disclosure of information, compliance with Gibraltar’s Proceeds of Crime Act and the operation’s specific connection to Gibraltar.

Applicants will require specially-appointed “Authorised Sponsors”, experienced professionals who will guide applicants throughout the various stages of their token sale process.

Authorised Sponsors will need to set out their own unique Codes of Practice for each applicant, based on a specific set of principals outlined in the regulations.

The Gibraltar Financial Services Commission (GFSC) will maintain a public register of Authorised Sponsors, along with their Codes of Practice, clients and token operations to date.

The operation of secondary market platforms trading in tokens: The focus here is on transparency, with an emphasis on proper disclosure and careful supervision.

The goal is to create a safe, regulated platform for token trading that provides a healthy, competitive marketplace with enhanced investor protection (while simultaneously safeguarding Gibraltar’s reputation as a prime financial jurisdiction.)

Gibraltar’s DLT Regulations may also apply here, where appropriate.

The provision of investment and ancillary services relating to tokens: Once again the key words here are transparency and responsibility. Advice on investment in tokens, crypto-currencies or other related crypto investments must be clear, transparent, accurate and unbiased, weighing up the pros and cons while of each proposed investment while also fully taking into full account investors’ individual needs and specific circumstances.

The GFSC will then authorise and supervise, and maintain a public register of, special “Authorised token investment services” providers.

Operating a token-based business in Gibraltar

Although the Token Regulations are still in development, hundreds of businesses are already lining up for the opportunity to conduct their ICOs in Gibraltar.

Having met the right criteria, passed a rigorous set of checks and enjoyed close mentorship from experienced professionals form within Gibraltar’s crypto community, approved applicants will be allowed to conduct token generation events and/or initial coin offerings (ICOs), openly trade crypto assets including crypto-currencies and bit tokens, or launch their own crypto tokens in order to generate funding for new blockchain-based projects.

As Gibraltar’s largest law firm, Hassans advises and assists companies and individuals looking to invest or operate in Gibraltar.

Recent clients of the firm include the trading platforms eToro, BTCC, CEX and Token Market, whilst other notable clients include the messaging app, Telegram.

The fast pace and technological complexity of crypto can be challenging sometimes, so our dedicated FinTech team are here to guide and advise you every step of the way. Contact us today to speak with a member of our team and learn more about conducting token sales in Gibraltar.