The digital asset industry rang in the new year by climbing to a $1 trillion market cap as financial institutions have become more proactive in the space. To smooth the maturity of the industry, Gibraltar will announce a ’10th Core Principle’ regulation for digital assets – specifically for digital asset exchanges – at the direction of a working group consisting of industry experts recently convened.
The working group behind the Gibraltar Market Integrity Study will be primarily responsible for setting appropriate market standards for exchanges operating in the digital asset space. Additionally, the working group shall decide if the nature of the asset/item traded (i.e. security, utility or exchange tokens) affects market integrity standards.
The DLT (distributed ledger technology) framework in Gibraltar currently incorporates 9 principles applying to businesses operating under the purview of the Gibraltar Financial Services Commission (GFSC), the territory’s financial regulator.
The goal of the group is to set global market integrity and regulatory standards for crypto exchanges and other marketplace platforms in the industry, whilst acknowledging the recently defined standards by other jurisdictions. Additionally, the framework looks to aid those who have the ability to create crucial foundational concepts for the work of other watchdog and/or regulatory bodies such as the Financial Action Task Force (FATF), European Commission and the International Organization of Securities Commissions (IOSCO).
In 2020, the IOSCO published standards for trading platforms and the European Union published proposed comprehensive regulations for the digital asset space in Markets in Crypto-Asset Regulations (MiCAR).
However, Gibraltar’s amended legislation will be the first set of legislated principles to ensure digital exchanges/operators protect customers/market integrity by looking to ensure guidance of efficiency, transparency and an orderly market.
This comes at a time where digital assets have been criticized by the Financial Conduct Authority (FCA) in the UK as “cryptoassets may not be subject to regulation beyond anti-money laundering requirements” – meaning that there is little customer protection against exchanges’ malpractice beyond obvious criminality or gross negligence. Thus the 10th Core Principle of Gibraltar, once established, will lead the global regulatory guidance in this area. The territory is forward-thinking within the crypto industry, having introduced regulatory oversight to DLT with legislation since 2018.
The Market Integrity working group consists of;
The other 9 core principles DLT providers must adhere to in Gibraltar include;
This follows a number of important updates to the jurisdiction’s bespoke regulatory framework governing ICOs, investments funds in digital assets, etc. The jurisdiction has set out clear licencing and regulatory legislation specifically for DLT providers since ’18 in the Financial Services (Distributed Ledger Technology Providers) Regulations 2017.
In addition, DLT providers in Gibraltar are regulated by the following; Financial Services Commission (Fees) Regulations 2016, Proceeds of Crime Act 2015, Financial Services (Information Gathering and Co-operation) Act 2013, Financial Services Commission (Supervisory Acts) Order 2012, Counter Terrorism Act (of 2010) and the Financial Services (Investment and Fiduciary Services) Act (of 1989).