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GIBRALTAR – OVERVIEW

Gibraltar is a UK Overseas Territory and has been British since 1704; Gibraltar enjoys a great measure of self-government. It has a written constitution in the form of the Gibraltar Constitution Order 2006. This, apart from embodying the fundamental freedoms, sets up a Westminster-style democratic Government. It also defines the responsibilities of the Government. Gibraltar’s legal system mirrors that of England and Wales. It is a common law jurisdiction that applies the principles of Equity. Gibraltar’s statute law consists of Acts passed by the Gibraltar Parliament and very few English Acts of Parliament made applicable to Gibraltar by Orders in Council. The Gibraltar Parliament enacts the statute laws of Gibraltar. The statute law of Gibraltar normally follows the pattern of English and European Union legislation by virtue of its EU membership since 1973.

Regulatory Landscape

Gibraltar’s finance sector is dynamic, continually evolving to accommodate the needs of emerging new industries, technology and entrepreneurs whilst always catering for the needs and protection of consumers. The Gibraltar Financial Services Commission (GFSC) regulates the financial services industry in Gibraltar.

A DLT/BLOCKCHAIN FRIENDLY JURISDICTION

On the 1st January 2018, the Financial Services (Distributed Ledger Technology Providers) Regulations 2020 (DLT Regs) came into force cementing Gibraltar’s position as a crypto friendly jurisdiction. The DLT Regs are designed to provide an efficient, pragmatic and safe framework for firms engaging in DLT business. The DLT Regs regulate the “Carrying on by way of business, in or from Gibraltar, the use of distributed ledger technology for storing or transmitting value belonging to others.” (DLT Provider) The licensing regime has led to a large number of business wishing to establish themselves in Gibraltar and has allowed those business to grow and avail themselves of services available in Gibraltar but not available elsewhere (e.g., banking).

THE DLT PROVIDER’S REGIME

Entities which store and/or transmit value, belonging to others, on the blockchain, will fall within the remit of the DLT Regs and will require authorisation from the GFSC: “Carrying on by way of business, in or from Gibraltar, the use of distributed ledger technology for storing or transmitting value belonging to others.”

AUTHORISATION PROCESS

The authorisation process consists of two stages: pre-application engagement; and full application.

Pre-application engagement

Submission of pre-application form to the GFSC together with business plan and model together with details on the proposed activity and/or services the applicant wishes to provide. The purpose of this pre- application engagement is to discuss with the GFSC whether the proposed activity will fall within the scope of the DLT Regs. As part of this process the GFSC will assess the inherent risks and complexity of the proposed business’ activity as well as the business model. The GFSC will provide feedback to the applicant within approximately 2 weeks of this and the feedback will include the category (see table on next page) assigned to it by the GFSC and the appropriate fee payable (table on next page).

Full application

This stage of the application process requires the submission of the complete application pack to the GFSC. It will also include a face to face meetings/presentations with the GFSC which will cover:

  • background, qualifications and expertise of the key individuals of the business;
  • the business plan;
  • financial projections and minimum capital requirements; and
  • evidence of how the business will comply with the 10 regulatory principles under the DLT Regime (see schedule 1).

The GFSC’s turnaround for the application will be approximately between 6-9 months from the submission date. You should allow about 1 month for the preparation for the application. The application process will involve a series of questions that the GFSC will ask for further clarity and better understanding of the business, proposed polices and procedures.

DLT Provider
Category

Initial Application
Assessment

Application Fee

Initial Application
Assessment

Annual Fee

DLT Provider Category

Complexity Cat 1

Initial Application Assessment

£2,000

Application Fee

£10,000

Initial Application Assessment

£8,000

Annual Fee

£10,000

DLT Provider Category

Complexity Cat 2

Initial Application Assessment

£2,000

Application Fee

£20,000

Initial Application Assessment

£18,000

Annual Fee

£20,000

DLT Provider Category

Complexity Cat 3

Initial Application Assessment

£2,000

Application Fee

£30,000

Initial Application Assessment

£28,000

Annual Fee

£30,000

Application considerations

  • The GFSC also has the ability to charge supplementary fees. Any supplementary fees shall be disclosed and agreed with the applicant at the initial application assessment stage.
  • Annual Fees shall include a base fee of £11,330 plus a trading fee equal to 0.1% of the Applicants reported volume of trade (up to a max of £60,000). The GFSC reserves the right to charge an additional fee of £22,660 if the supervision is more complicated.
  • The business must comply with the 10 regulatory principles (see Schedule 1);
  • Capital requirements – there are no minimum capital requirements but the DLT Provider will be expected to maintain sufficient financial resources to ensure that it can be run in a sound and prudent manner. As a minimum, DLT Providers are expected to hold sufficient capital to ensure an orderly, solvent wind-down of its business. You may wish to consider engaging a Gibraltar accountant to assist with this. Please let us know if you would like us to introduce you to a Gibraltar accountant.
  • The minimum requirement for licensing would be to have two/three senior individuals working from Gibraltar with sufficient experience to oversee the entirety of the business. Apart from the minimum of two employees in Gibraltar, employees can also be located elsewhere but mind and management of the business must be in Gibraltar.
  • In the process of establishing your business in Gibraltar, you may find that you need assistance with conveyancing, employment and other matters. Triay Lawyers is a full practice law firm in Gibraltar. Please do not hesitate to contact us, we would be delighted to assist.

OUR PROPOSAL

The vehicle of choice for DLT Providers is a private company limited by shares.
Subject to receiving the relevant documentation (see Next Steps), we would be delighted to assist with the establishment of your company in Gibraltar.
2 Please note that the incorporation process takes approximately 3 days.

Our role will include:

  • advising on the establishment of your Gibraltar company and drafting the entity’s constitutional documents
  • assisting you with the opening of a bank account in Gibraltar 3
  • assisting with and advising on the business plan and policy documents
  • preparing the application forms, individual questionnaires

NEXT STEPS

If you would like to proceed to obtain a fixed fee proposal for your project we will need a copy of your draft business plan or a 2–3-page overview of your proposed business together with details on all proposed shareholders and directors;

The information provided will be reviewed internally and processed by our team. These forms will enable us to assess:

  • whether it is a project we want to assist with;
  • the risk profile of it; and
  • the expected amount of work.

Once we have reviewed this documentation, we will contact you within one business day to advise whether or not we are able to proceed. If we are able to proceed, we will also provide you with a fixed fee proposal, our engagement letter and terms of business. This will include a request that up to 100% of the fixed fee be paid upfront as a deposit and thereafter for staged payments to be made.

CONTACT US

Schedule 1

The 10 DLT Regulatory Principles
  1. A DLT Provider must conduct its business with honesty and integrity.
  2. A DLT Provider must pay due regard to the interests and needs of each and all its customers and must communicate with them in a way that is fair, clear and not misleading.
  3. A DLT Provider must maintain adequate financial and non-financial resources.
  4. A DLT Provider must manage and control its business effectively, and conduct its business with due skill, care and diligence; including having proper regard to risks to its business and customers.
  5. A DLT Provider must have effective arrangements in place for the protection of customer assets and money when it is responsible for them.
  6. A DLT Provider must have effective corporate governance arrangements.
  7. A DLT Provider must ensure that all of its systems and security access protocols are maintained to appropriate high standards.
  8. A DLT Provider must have systems in place to prevent, detect and disclose financial crime risks such as money laundering and terrorist financing.
  9. A DLT Provider must be resilient and have contingency arrangements for the orderly and solvent wind down of its business.
  10. A DLT Provider must conduct itself of any markets in which it participate

Schedule 2

1 The provision of company secretarial and management services is a regulated activity in Gibraltar. We work with a number of service providers in Gibraltar Following an introduction to them, we would recommend you negotiate fees directly with them.

2 There are a small number of Gibraltar banks that are providing services to the crypto industry. They will only consider applications for banking when the entity has been advised by Gibraltar lawyers. We work very closely with these banks to assist our clients with the account opening process. The decision of whether or not to bank a client rests with the bank and we therefore cannot guarantee that an application will be successful.

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