Gibraltar has established itself as the only jurisdiction worldwide to establish a regulatory framework for distributed ledger technology (DLT) businesses, aka ‘blockchain’, and for other crypto currency-related businesses. The Financial Services (Distributed Ledger Technology Providers) Regulations 2017 came into force (DLT Regs) on 1st January 2018 and its regulations are designed to provide an efficient, pragmatic and safe framework for firms engaging in DLT business.
As a result of the influx of entrepreneurs, not only is Gibraltar one of the few jurisdictions globally that have crypto-friendly banks, it has also launched specific funds for those entrepreneurs who wish to offer crypto currency investment opportunities.
It is well known that this is a volatile sector, but the Gibraltar Funds and Investment Association (GFIA) recognised that there is a demand amongst investor communities for access to this new asset class. With this at the forefront of its vision, GFIA has created a crypto fund committee to address the risks and other issues associated with crypto currency funds.
Corporate Governance Code for Crypto Funds in Gibraltar
GFIA is launching a Corporate Governance Code for Crypto Funds, thereby paving the way for the establishment of Crypto Funds in Gibraltar. One of GFIA’s first resolutions were to encourage the use of Experienced Investor Funds (EIFs) as a central element of the regulatory regime for crypto funds.
Gibraltar created its EIF regime in 2005 and since then has been establishing ‘traditional’ collective investment schemes.
The EIF vehicle offers a low cost regulated infrastructure that is able to invest in the asset class detailed within its offer document.
Although most of the principles related to crypto funds can be found in the existing GFIA Code of Conduct issued several years ago in conjunction with the Gibraltar Financial Services Commission, the new code aims to help practitioners apply its principles to crypto assets.
Who qualifies as an Experienced Investor?
Investment in EIFs is open to anyone who fulfils one of the nine definitions of an “experienced investor” as set out in the EIF Regulations 2012. It is also worth noting that an experienced investor can self-certify his/her/its status as an experienced investor.
How Triay can with the establishment of Crypto Funds
The GFSC has to be notified within 10 business days of an EIF being established. This notification also includes a legal opinion that the new EIF meets the EIF Regulations.
The time to takes to set up an EIF is simply down to the time it takes us as legal counsel together with the client and other service providers to prepare all the required paperwork. An EIF is deemed authorised at the point of launch provided it complies with the EIF Regulations and therefore there is no regulatory downtime in this process.
There are a number of service providers that an EIF must appoint in order to comply with the EIF Regulations, and as a client of Triay we would be delighted to introduce you to all of the following:
- 2 x EIF Directors (who are licensed by the GFSC to act as such).;
- A fund administrator;
- Company secretary (preferably the same entity as the administrator);
- Bank; and
We can also help you select the most appropriate vehicle for your EIF. The two most popular choices are:
- (a) a private company limited by shares; or
(b) a Protected Cell Company (PCC).
A PCC is considered one legal entity despite having the ability to establish various cells which can have differing investors and investment mandates. It is important that the directors and service providers have suitable experience in the underlying asset classes.
Our legal experts will also guide you through the requirements of the Alternative Investment Fund Managers Directive (AIFMD), which has been transposed into Gibraltar law, as well as Gibraltar’s taxation rules. Furthermore, Gibraltar has no exchange controls and has unrestricted currency facilities.
Triay at the forefront of Crypto Funds in Gibraltar
Triay’s Financial Services team has been at the forefront of Gibraltar’s growth as a Financial Services jurisdiction and its establishment as a Fintech jurisdiction and our funds team has been recognised by Legal 500 as Tier 1 for financial services.
To obtain a fixed fee proposal for your project, contact us at firstname.lastname@example.org – we will be delighted to help.