Blockchain company Valereum announced on 28 January that it is to buy 90% of the Gibraltar Stock Exchange (GSX) to “establish the GSX as one of the world’s first fully regulated, integrated fiat and digital exchanges.”
Valereum, listed on London’s Aquis Exchange, said it will need approval from Gibraltar regulators to allow listed instruments on the GSX access to a regulated pool of crypto capital. Last year it said it planned to accept all major cryptocurrencies on GSX, including Bitcoin, Ethereum, Cardano and Dogecoin.
The GSX has permitted financial firms to list blockchain-based securities on its GSX Global Market platform since 2019 and has regulatory permissions from the Gibraltar Financial Services Commission (GFSC) to cover the use of blockchain or distributed ledger technology.
“The GSX will be the world’s first exchange to create a seamless and fully regulated bridge that links the fiat and crypto markets,” Valereum said in a statement. “This will give listed instruments on the GSX access to a regulated pool of crypto capital that is not available anywhere else, and it will give crypto currency holders the ability to have a direct, verifiable holding in fiat securities.”
“This simplifying of the acquisition structure is important for all parties and will lead to faster completion of the transaction,” says Richard Poulden, chairman of Valereum. ‘We look forward to working with the GFSC to realise this vision for Gibraltar.’
Over recent years, the Gibraltar government has created a regulatory framework for crypto businesses with the aim of encouraging crypto and blockchain firms. Gibraltar already houses crypto exchanges, custodians, funds, banks, token issuers and foundations. According to a 2021 report by PwC, it is also now the third-most popular location for crypto hedge funds to domicile, after the Cayman Islands and the US.
Valereum is trying to harness a cryptocurrency sector that is worth roughly USD3.5 trillion. According to executive director Patrick Lyle Young, if the company successfully acquires GSX, the exchange will operate as an ordinary stock exchange, with the sole exception that trades can be paid for in cryptocurrencies rather than just fiat. These stocks can then be leveraged as collateral for other financial activities, like bank loans.
Customers will be able to exchange cryptocurrencies for stocks, which will be held in a trust company owned by the exchange. Valereum acquired Gibraltar-based fund and trusts services group Juno in December to underpin the bridge between crypto and fiat currencies.
“The last thing [Bitcoin holders] want to do is sell, because if they sell the cryptocurrency, they’re going to have a huge [capital gains] tax bill,” said Young. “If they spend the cryptocurrency to buy another asset denominated in cryptocurrency, they don’t have that tax liability.”