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Financial Technology
An understanding watchdog makes for a ‘go-to’ place for new Fintech business
Use of virtual currencies and the blockchain to ease and make more secure a raft of financial services and other applications is expected to be given a boost with Gibraltar’s plans to introduce a world-leading regulatory regime
New technology companies will be drawn to the jurisdiction by promises of encouragement and support rather
than having an overly cautious and restrictive approach, according to a group of business professionals attending an end-2016 roundtable discussion organised by accountancy firm, KPMG (Gibraltar) and Gibraltar International Magazine.
But major obstacles remain for innovative entrepreneurs: acceptance by banks to provide initial project finance and operational bank accounts; awareness of support services; and having a watchdog that also seeks to protect consumers and investors.
All of which provides an opportunity for Gibraltar to become the go-to financial technology (Fintech) jurisdiction, with the intervention of government, marketing of the advantageous business environment and support services, and having an understanding financial services regulator.
A blockchain is a distributed ledger of unchangeable, digitally recorded data that provides full transparency in virtual currencies applications like Bitcoin and for land title transfer and accountancy, for example.
Micky Swindale, who is head of advisory for KPMG’s Gibraltar and Isle of Man operation, told the eight sector guests: “As an advisor, just about everyone I’m dealing with on just about anything they are doing at the moment, is asking whether we think they should be doing it on blockchain!
“It’s not an automatic, one size fits all”, she declared, “however, whilst it may not work for all applications, I think there will be a very quick evolution [of the technology].”
Siân Jones, founder of UK virtual currency consultancy Coinsult, taking part by remote video connection, submitted: “The
Vastly bigger potential seen beyond Bitcoin: roundtable members, (l-r): Nick Cowan, Ransu Salovaara, Peter Howitt, Siân Jones (on screen), Nicky Gomez, Brent Almeida, Tim Connal and Micky Swindale
market capitalisation of bitcoin is about £10-12bn, small beer compared to wider currencies, but when you look at the much, much wider range of blockchain use cases, you start to see massive potential.”
Having worked for the last three years in virtual currency and distributed ledger technology, and on public policy in Brussels, Jones reported: “There has been a huge shift in the last year on thinking just in terms of virtual currencies, which is dominated by Bitcoin and accounts for around 94% of the value of all those blockchain-based digital assets.
Vast potential predicted
“The potential in other use cases – financial and non-financial – is vastly bigger in my opinion than the virtual currency and payment related stuff, which itself will become much bigger in time. In that context, when you look at the broad terms and say Gibraltar wants a piece of that, it starts to make some very significant sense,” Jones observed. “My crystal ball prediction is that that space will account for less than 10% of all the uses and value of use cases for the wider underpinning technology.”
As an example, a recent report on insurance by accountancy firm, PwC, foresaw a US$5-10bn opportunity in the wholesale insurance market from the use of distributed ledger technology.
But as the roundtable participants quickly identified, having a sound, safe regulatory environment to protect investors, the public and a jurisdiction’s reputation was necessary if virtual currency and blockchain initiatives are to flourish. Yet, New York State – where a regulatory regime launched in 2015 and two years in the making – had been “a spectacular failure” resulting in just two or three licences being granted, “because it is a significant, comprehensive, all-encompass- ing, highly burdensome piece of regulation”, Jones declared.
At over 45 pages long, the BitLicence had caused a flight from NY State of innovative start-ups, “simply because the burden and cost has been so significant; they moved out to other parts of the US, or to Europe and elsewhere”, she said. “That [approach] is certainly not something we in Gibraltar would want.”
With Jones as an advisor, it was revealed that Gibraltar Financial Services Commission (GFSC) has been actively looking into the possibility of developing its own ambitious regulatory solution designed to create the right environment for new technology companies to settle and grow in the jurisdiction. The new licence-type is likely to be the first in the world to present a practical solution for users of virtual currencies and the blockchain.
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Gibraltar International
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