By The Hon. Albert Isola MP, Minister for Digital and Financial Services, HM Government of Gibraltar
What does the recent addition of the 10th regulatory principle on market integrity provide, and what is the importance of adding this to the existing regulatory framework?
The 10th regulatory principle on market integrity was recently implemented as part of the Government’s stated goals of providing regulatory certainty and leading the way in setting standards for, and maintaining pace with, the burgeoning digital asset sector. It was drafted with an aim of setting the standards for market integrity in the industry, the first time this has been attempted for the diverse range of assets and activities which exist within the virtual asset marketplace. It mandates that all Distributed Ledger Technology (DLT) providers operating in Gibraltar conduct themselves in a manner which maintains or enhances the integrity of the markets in which they participate, with a concurrent onus that consistency be maintained with the other 9 Regulatory Principles in doing so. The Gibraltar Financial Services Commission (GFSC) has published a Guidance Note which sets out its expectations of DLT Providers in this context, and can be found on the Gibraltar Financial services website: https://www.fsc.gi/
Just like any other market, we believe that in order for the virtual asset market to operate effectively, it is imperative that they do so in a manner which is fair, efficient and orderly. This is crucial to ensuring that those who wish to participate in this market can enjoy the same levels of trust that those in traditional, widely regulated markets do.
What did the process for shaping this legislation look like, and who were the key figures that were involved?
Since the implementation of the DLT regulatory framework in 2018, the GFSC has approached drafting legislation in this sector in a manner which holds a balanced consideration and awareness for the interests of both the public and private sector. Accordingly, the process for shaping this legislation was carried out through rigorous consultation with a panel of experts across government bodies, specialist advisors, and industry figures, who together comprised a working group. This working group, along with further sector representatives, played an integral role in the shaping of this piece of legislation including consultation with GFSC during the drafting process.
I remain most grateful to the members of the working group that include: Lee A Schneider, Emma Channing, Joshua Ashley Klayman, Roman Beck, Jannah Patchay, Joey Garcia, Tongtong Gong, Barbara Halasek and Nicholas Philpott.
In the recent PwC Annual Global Crypto Hedge Fund report, Gibraltar was ranked third. What do you think has facilitated Gibraltar in achieving this ranking and what moves are you making to improve upon this moving into the future?
Gibraltar is in a position to achieve this ranking as a result of continued proactive efforts to change and adapt to the fast pace of the virtual asset industry and the existing highly effective funds legislation. This has allowed a regulatory framework to be put into place which provides an enhanced level of regulatory certainty to service providers. In turn, it has facilitated robust protection for their growing consumer bases, ultimately, allowing for increased levels of both trust and assurance to both those in institutional and retail settings.
Moving forward, the intention is to maintain this momentum through a sustained focus on regulating and adjusting to any relevant developments which should arise in this fast-paced industry. This will ensure that existing frameworks remain fit for purpose and are revised when necessary, and further, it will allow for improvements and adjustments to be made alongside changes in the sector.
What is the significance of the Dual Funds regime which was recently launched in Gibraltar and what significance does this have for Gibraltar’s fund sector as a whole?
The Dual Funds regime is significant in that it has now positioned Gibraltar so as to maintain its long established AIFMD compliant funds management regime (which has direct access to UK markets) whilst also providing the option for Experienced Investor Funds to opt out of this regime when targeting global audiences. This will allow for effective and controlled exposure to both UK and global markets, which is one of the considerations for today’s sophisticated investors and their managers when making investment choices.
The launch of this regime has significance as it highlights yet another example of the interplay which exists between the public and private sector. My Ministry, the Gibraltar Funds and Investments Association (GFIA) and the regulator have been working together in tandem to develop and deliver on this project which, above all else, provides greater choice to the market. Furthermore, it will encourage wider interest in Gibraltar as a successful jurisdiction amongst investors on the European continent.