Distributed Ledger Technology and Gibraltar: A Giant Leap Forward

There is often a stigma attached to those willing to think differently or break the zeitgeist of their time. Galileo was heavily persecuted by the Catholic Church for challenging the view that Earth was at the centre of the solar system. Nikola Tesla was ridiculed for his Alternate Current by Thomas Edison, albeit for financial reasons, and even Einstein’s Theory of Relativity was mocked by German physicist and Nobel Prize winner Philipp Lenard.

This tells us that believing in and championing something different that may challenge the status quo will face resistance. The credibility or logic of these challenges or criticisms often needs little sense or relevance to damage its credibility. This makes the task of promoting change more problematic.

Governments are often the most skeptical of stakeholders. Reagan once said, “If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.” In a similar vein, and particularly in the digital age, it is more a case of, “If there’s benefit to be gained, embrace it. If we can’t keep up with it, regulate it. If it’s going to happen anyway, support it.” This is certainly the approach taken by the Gibraltar Government and our regulator regarding Distributed Ledger Technology (“DLT”).  

DLT (or “blockchain”) is a secure peer to peer technology. There is no longer the need for a central controller. It is a system that monitors activities and information across a network of personal computers, without any one person or middleman intervening. This disruptive technology is changing how the world does business and is the foundation upon which cryptocurrencies exist. DLT can help manage and verify online data such as transactions and personal data which means that the running costs of businesses can be reduced and processes simplified. 

Gibraltar has been a hub for financial services activities for some time now. Having embraced online (née telephone) betting in the 1990s and offered insurance companies a stable and strategically beneficial jurisdiction to operate in (also funds, trusts, company management), we are no strangers to major financial, complex and technology-driven industries. 

Gibraltar was one of the first EU jurisdictions to grant online gambling licenses to commercial operators. Our aim was to attract high-tech quality industry, create attractive jobs and enhance the skillsets of our population whilst policing the licensed businesses.  This, in turn, promoted the jurisdiction as a centre of excellence. It was and continues to be a great success.

Gibraltar saw potential in online gaming and proactively promoted, embraced and put a regulatory framework around it so that it would protect consumers without harming the product. DLT is benefiting from this same approach. The new DLT Regulatory Framework (the “DLT Regulations”) announced in October 2017, which comes into force in January 2018, offers those “carrying on by way of business, in or from Gibraltar, the use of distributed ledger technology for storing or transmitting value belonging to others[1]” a legitimacy and security that is not found elsewhere. After two and a half years of research and planning, once again Gibraltar sets the trend.

Word spread fast and the DLT Regulations became global news. They have reshaped the framework for those looking to set up or who are already operating in this space. Relocating DLT operations to Gibraltar is now a real option for many, as licensing offers not only reassurance for customers, it also gives a competitive advantage to the haves versus the have-nots.  It will have the added benefit of introducing a new wave of skillsets into the local market, such as blockchain architects and crypto experts.