Entrepreneurial, determined and diversified have been the key qualities driving Gibraltar’s success as a financial centre. The impact of Brexit on this British Overseas Territory has yet to be decided, but Gibraltar continues to adapt to the challenges and opportunities thrown up by the fast moving financial sector.
At the start of this year Gibraltar became the first jurisdiction in the world to implement a purpose-built legislative framework for fintech businesses that use ‘blockchain’ or distributed ledger technology (DLT).
Despite some scepticism over the hype surrounding this revolutionary technology, many firms had been actively seeking a jurisdiction to regulate them. The two main advantages to DLT providers being regulated under the new rules are to help the business gain credibility with customers and to make it easier to obtain a bank account to run the business.
The Gibraltar Financial Services Commission (GFSC) is currently processing some 35 applications for DLT Provider Licences, with a similar number in the pipeline. To put these numbers in perspective, a total of 50 licences were approved across all industries in Gibraltar in the year ended 31 March 2017.
Gibraltar is also working on introducing the world’s first regulations for initial coin offerings with dedicated rules for the cryptocurrency sector. These will establish disclosure rules that require adequate, accurate and balanced information to anyone buying tokens.
New start-ups will bring economic activity, employment and opportunity to the Rock and professional services providers like Sovereign are working alongside the government to create the infrastructure to support them. Gibraltar is also seeing spin off in other areas, with increased numbers of applicants for banking and electronic money institution (‘e-money’) licences.
In insurance, a similar pattern is developing. ‘Insurtechs’ are technology-led companies that enter the insurance sector, taking advantage of new technologies to provide coverage to a more digitally savvy customer base. DLT technology also offers potential use cases for insurers that include innovating insurance products and services for growth, increasing effectiveness in fraud detection and pricing, and reducing administrative cost.
It may come as a surprise that over 90% of Gibraltar’s insurance business is with the UK. With passporting rights from Gibraltar into the UK secure post-Brexit, Gibraltar remains a unique alternative domicile for insurance businesses that are focused on the UK market. The rapid development of Gibraltar’s fintech sector therefore offers opportunities to develop a complementary insurtech hub that will attract insurance businesses.
Gibraltar’s remote gambling industry is the most significant in Europe, if not the world. Interest in Gibraltar as a licensing jurisdiction remains strong in terms of new enquiries and DLT and cryptocurrency may well present an interesting new area for gambling start-ups in Gibraltar.
The strength of Gibraltar’s links to the UK market is evident from the fact that last year Gibraltar processed 602 passporting applications from the UK relating to a range of services types. The UK and Gibraltar governments have agreed proposals for the continuation of a common market between the UK and Gibraltar following the UK’s exit from both the EU and the European Economic Area.
Gibraltar has also stayed ahead of the curve in terms of international standards on transparency and exchange of information. In 2014, the OECD found that Gibraltar was ‘Largely Compliant’ with international standards – the same categorisation as the UK and the US – and the Gibraltar government has committed to transpose measures under the OECD framework on Base Erosion Profit Shifting (BEPS) and to the establishment of a public register of ultimate beneficial ownership.
In this era of transparency, innovation and substance, Gibraltar is truly leading the way!
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