BLOG: Flexible fit – Building the right regulatory framework
Hon. Albert Isola M.P. – Minister for Commerce of Gibraltar
In my last blog, I honed in on the nine core principles underpinning Gibraltar’s landmark DLT regulatory framework and assessed the benefits of this principles-based approach. Building on this, I would like to caveat that a breakthrough innovation like Distributed-Ledger-Technology (DLT) requires a fresh regulatory perspective, informed heavily by the needs of industry, with a reasonable amount of flexibility.
As such, we need regulation that progresses alongside the industry, as opposed to frameworks that are susceptible to becoming antiquated. In Gibraltar, we are unwavering in our focus on the nine core principles, which are the pillars on which we are building a sustainable blockchain ecosystem. However, we are equally focused on providing breathing room for projects, facilitating open dialogue between regulators and industry, as we collectively set the standard for DLT regulation globally.
Becoming the first jurisdiction in the world to introduce a purpose-built DLT regulatory framework has been a major success story for Gibraltar, an achievement that has been powered by experience and long-term planning. In 2015, two years before we introduced our framework and before ‘blockchain’ was a common term, the ball was set in motion between regulators and industry specialists in Gibraltar to initiate the development of a sustainable DLT regulatory framework.
This kind of foresight isn’t the exception for Gibraltar. As a jurisdiction, we have been an early innovator across emerging technologies, rising to the forefront of the gaming industry through comprehensive licensing processes. The online gaming sector now accounts for around 25 percent of Gibraltar’s gross domestic product, with approximately 60 percent of all online gambling bets taken by firms in Gibraltar.
Learning from this experience, Gibraltar has again ascended as a global licensing trailblazer, this time with respect to DLT regulation. We continue to welcome quality blockchain projects that want to avail of our supportive business environment, and tap into the thriving blockchain community that has formed on home soil. So far, over 30 companies have applied to the GFSC for a DLT licence. I look forward to welcoming more ambitious projects to Gibraltar in the months and years ahead.
A report by PwC painted a picture of a regulatory landscape that businesses have been navigating with great difficulty, noting that a lack of clear regulation is stifling the efforts of blockchain teams who want to deliver real change to a host of sectors. Inaction by regulators is getting in the way of potentially breakthrough projects. In Gibraltar, the outlook is much brighter, with open communication between regulators and industry figures having helped to create a set of parameters that satisfied both parties. This kind of environment is hard to find on the international front, so it is unsurprising to see the wave of positivity and vibrancy emanating from projects who appreciate the support and structure that is helping them to flourish here in Gibraltar. When the shackles are off, creativity and innovation endure.
The creation of a principles-based approach that prioritises flexibility as well as a core framework of principles, is the antidote to tackling the prevalence of developer apprehension and regulatory ambiguity. Companies, prudent by nature, will always play it safe when confronting a lack of clear guidance on best regulatory practice, choosing the safety of inaction rather than a leap into the cold waters of regulatory uncertainty. Gibraltar’s value-based, industry-informed framework is an example of vision and ambition operating in parallel, in which regulators and businesses collaborate to address industry inefficiencies, accelerate protracted processes, and improve the lives of citizens. The world is watching.