ETHLend had the pleasure to talk to Mr. William Gracia (official from Gibraltar Financial Services Commission) and Mr. Marcus Killick (CEO of law firm ISOLAS).
We created a summary about the meet up in Gibraltar and summarised our talks :
- Albert Isola MP, Minister for Commerce for HM Government of Gibraltar
- Marcus Killick, CEO of ISOLAS law firm. Chairperson of the Commission of the Office of Fair Trading (OFT) ; Non-Executive Chairman of Gibraltar Stock Exchange (GSX) & a non-executive director of a number of other companies: Gibraltar International Bank, Tradewise Insurance Company Ltd, Tradewise Group of Companies Ltd, European Financial Planning Group , Peninsula Underwriting Ltd & Callaghans Insurance Brokers
Main points of the presentations:
- Both speakers stressed that DLT (distributed ledger technology) and related companies are new but already well established entities in the economy.
- Interests of stakeholders is massive and staggering in future regulation and development.
- It was stated that clearing, settlement and other post-trade management processes and bank reconciliation processes are areas where the use of DLT might turn out to be transformational in terms of efficiency, speed, and resilience.
- DLT could be used to increase data sharing, transparency and trust not only between government and citizens, but also between private sector actors and clients.
- Speakers agreed with the EU Parliament note that DLT’s potential to accelerate, decentralise, automate and standardise datadriven processes at lower cost has the potential to alter fundamentally the way in which assets are transferred and records are kept, with implications for both the private and the public sector.
- Gibraltar Financial Services Commission (GFSC) has collected all the input from interested stakeholders and issued the Consultation Paper. Regulatory framework will be put in place in the end of year 2017.
- It was highlighted that one of the GFSC’s priorities is to continue to actively support the development of new markets and activities, promoting innovation that is well considered and safe for consumers and the jurisdiction.
- GFSC will be to governmental body to authorise and supervise DLT firms.
- There is no EU or UK legislation or regulations concerning the use of DLT or cryptocurrencies. In June 2016, the European Commission published a draft directive amending the 4th Anti-Money Laundering Directive that proposes, inter alia, making cryptocurrencies’ exchanges and custodian wallet providers obliged entities for money laundering purposes.
- Customer protection and sufficient available information are essential for healthy DTL market.
- There is inherent difficulty in regulating activities that use rapidly-evolving technology. Regulatory measures and responses should be formulated based on objective understanding of the processes employed and assessment of the risks involved.
Three pillars s of desired regulatory outcomes
· Consumer Protection · Protecting the Reputation of Gibraltar · Economic Benefit
Fundamental principles of the healthy and competitive market
GFSC listed the following principles that will ensure DLT market proper functioning:
- A DLT firm must conduct its business with honesty and integrity.
- A DLT firm must pay due regard to the interests and needs of each and all its customers and must communicate with its customers in a way which is fair, clear and not misleading.
- A DLT firm must maintain adequate financial and non-financial resources.
- A DLT firm 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.
- A DLT firm must have effective arrangements in place for the protection of client assets and money when it is responsible for them.
- A DLT firm must have effective corporate governance arrangements.
- A DLT firm must ensure that all systems and security access protocols are maintained to appropriate high standards.
- A DLT firm must have systems in place to prevent, detect and disclose financial crime risks such as anti-money laundering and countering terrorist financing (AML/CFT).
- A DLT firm must be resilient and must develop contingency plans for the orderly and solvent wind down of its business.
Conclusions and remarks
On the basis of the presented information we can reach at least two main conclusions. First of all, Government of Gibraltar takes very progressive approach towards cryptocurrencies and all related services and activities. Official position is to encourage investment and registration in Gibraltar in regards to the DLT, variety of cryptocurrencies and related services. Secondly, due to the official recognition of the new financial industry, there is an attempt to closely follow-up the development and issue relevant legislation. During private conversation with the official from GFSC (Mr William Gracia), it was expressed that GFSC has concerns mainly on money-laundering, financing of terrorism activities and consumer protection. On Wednesday (21/06) Ethereum had a short term but major dip, which resulted in significant amount of loss for uninformed consumers. In general, GFSC have team of experts and are closely monitoring market for almost all cryptocurrencies.
Conversation and discussion with Mr Marcus Killick (CEO of law firm ISOLAS) was thoughtful and interesting. His main points on the EthLend were the following:
- Idea of collateral which is enforced by Smart Contracts is great and logical step in the lending activities;
- He expressed view that certain legal problems might arise in the future, in case if governments won’t be active enough to issue the relevant legislation;
- He was very interested in the mechanisms ensuring protection of interests (both for lender and borrower) in case of major price fluctuation of tokens;
- He fully supports idea of company shares, property or commodities which could be traded or pledged via blockchain based platform.
In general, idea of lending with lower fees, skipping middleman and democratized lending was warmly accepted by participants, also, due to the fact that Gibraltar is famous for its liberal approach and business efficiency. I have answered questions on the dates when White Paper would be realised and languages EthLend is covering. EthLend can approach organisers on the possible talk on our activities and general concept for future meetups.
For more information about ETHLend, read the full White Paper here.
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