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Financial Technology
Nicky Gomez, GFSC risk manager and	restrictive framework and the need to take
sympathetic regulation. “The bigger operators that I have spoken
to seem to be intelligent about the need to find a good home for crypto companies, and also the difficulties of accessing the wider system – bank accounts, having relationship with card schemes - are not going to get better by staying out in the cold.”
Creating a bridge
Cue Brent Almeida, chief executive of WaveCrest Group, a Gibraltar-based digital payment solutions company, who stated: “Our solutions create a bridge between more traditional payment networks and the emerging Fintech ecosystem. We have seen this business vertical grow by over 600% in the last 12 months, but that success would never have been possible without a regulator here that – even in the absence of explicit legislation on virtual currencies - displays an appetite for that type of financial services innovation.”
However, as Philip Vazquez, a lawyer at Triay Stagnetto Neish and one of the organisers of Gibraltar Start-up, a voluntary body that aims to help Gibraltar’s entrepreneur and smaller innovative start-up companies, disclosed: “We are not experiencing notable interest from start-ups in this [Fintech] sector at this stage.	Bitcoin and crypto businesses are a new and growing area, for example.
“We are not sure why more innovative businesses are not coming to us, maybe they are coming into the jurisdiction at a higher level in Gibraltar, but we might in the next 12 months see Fintech and distributed ledger technology be the base of more smaller businesses.”
Micky Swindale recounted the IoM experience where “the regulator moved fairly quickly to extend aspects of financial and personal regulation to include virtual currency companies, but the initial flood of business attracted was rather cut off at source by the fact that local banks wouldn’t support those companies and became very nervous about dealing with them, even via businesses that were already customers. That can be a big issue.”
Howitt went further. “We see it here in Gibraltar too, it is a massive issue,” but he and Almeida both saw a big opportunity for the government to intervene and encourage the Gibraltar International Bank (GIB) it owned, to provide support, subject to sufficient
Continued overleaf
People “hungry for regulative certainty” in Fintech:
Micky Swindale, KPMG’s, specialist in digital ledger services
one of five involved in the regulator’s year- old specialist Innovate & Create team, explained: “The team’s purpose is to support start-up Fintech companies who want to establish in the jurisdiction.
“One of the things that we are very much aware of is that these kinds of firms are not used to working within a regulatory environment, so it is important that we adopt a supportive approach to working with them to get a better understanding of what it is that they want to offer, what the risks are, and to manage those risks to a level that falls within our risk appetite in an environment that will benefit consumers and the jurisdiction.”
As Sian Jones pointed out: “New York State shows exactly what can go wrong if you try and regulate a new technology that is still being developed. The businesses, activities, business models and use cases are all still evolving, and too early, too prescriptive regulation is detrimental to innovation.
Governments doing little
“Relatively little is being done by governments to support innovation, in spite of noises suggesting that it is happening. The UK, for example, makes a lot of noise about supporting Fintech, but in reality, there is little government support.”
One significant development is the UK Financial Conduct Authority’s (FCA) regulatory ‘Sandbox’ approach, which aims to “create a ‘safe space’ for businesses to test innovative financial products, services, business models and delivery mechanisms in a live environment without immediately incurring all the normal regulatory consequences of engaging in the activity in question”, Jones related. During 2016, around 20 jurisdictions have launched or are developing sandboxes.
The European Commission has also published a draft amendment to the 4th Anti Money Laundering Directive that includes bringing virtual currency exchanges and custodian wallet providers, into the realm of regulation by defining them as ‘obliged entities’.
Swindale, now also head of digital ledger services for KPMG's Islands Group [of seven financial services territories, including Gibraltar], interjected: “We have sounded this note of caution about putting in place a
time to stand back to allow these companies to develop and to understand how these technologies are being applied.”
She suggested: “This is a sector that while swift regulation might not be the wisest course, people are hungry for that certainty it gives potential customers.”
Tim Connal, GFSC’s senior legal advisor, reminded: “The remit of Innovate & Create is not just related to Fintech and virtual currencies.	Like a lot of things, it links back to our strategic business plan 2014-17, which includes support of innovation in Gibraltar, businesses coming in and the reputation of the jurisdiction.
“It is just a happy coincidence that a lot of the innovation going on in the financial services sector surrounds Fintech. We are looking also to help businesses that are not necessarily regulated, but that want to provide services to business in the jurisdiction that are regulated and provide support to licencing Fintech products.”
The World Economic Forum published a report in August that gave a ringing endorsement of the ability of blockchains to transform modern financial technology, Swindale underlined. In addition to increasing the speed and security of transac- tions worldwide by using cryptology, blockchain technology also can be used to reduce costs by leveraging cloud technology, she clarified, adding: “Blockchain can also improve regulatory compliance by offering detailed factual evidence and a solid trail of transactions for auditors and regulators.”
But some small entrepreneurs and other enterprises not experienced in operating in a regulated environment were put off by the envisaged responsibility and workload involved.
Peter Howitt, founding partner of local law firm Ramparts concurred: “We definitely have a divergence in the crypto space between those who are very pleased to carry on without supervision and those who take a more strategic long-term view, and probably have experience in other sectors where they can see there is a need for regulation and it is helpful if they do things in the right way.”
As someone deeply involved in eCommerce - electronic payments, electronic money - and eGaming, he disclosed: “I have a pension fund and I’d love to have a Bitcoin Exchange-Traded Fund (ETF), but I can’t; I’ve got an ISA. Those thinking more strategically realise that regulation is not a no-no, but there has to be thoughtful,
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