The Gibraltar government has taken a positive approach towards cryptocurrencies and is establishing a regulatory framework for distributed ledger technology (DLT) activities, including those related to virtual currencies. The Gibraltar Financial Services Commission (GFSC) will authorize and supervise DLT activities not currently regulated. Virtual currency is defined as a digital representation of value that can be traded but does not have legal tender status. Unlike some other jurisdictions, Gibraltar will not give virtual currencies the same status as fiat currencies, restricting its use and functions. The GFSC's regulatory approach aims to protect consumers and Gibraltar's reputation while promoting economic benefit. The new regulations are expected to be finalized by the end of 2017 and take effect on January 1, 2018.

1. September 2017
Regulatory Regime for Cryptocurrencies in
Gibraltar
The Gibraltar government has taken a positive
approach towards cryptocurrencies and is in the
process of introducing regulations for
investments in this area. In May 2017, the HM
Government of Gibraltar, Ministry for Commerce
published a document titled “Proposals for a DLT
Regulatory Framework” (The Proposal). The
Gibraltar Financial Services Commission (GFSC)
is the regulatory body that has been assigned the
task to frame and implement the regulation for
Distributed Ledger Technology (DLT) activities,
which includes virtual currency-related
businesses. The DLT framework will apply to
activities not currently subject to regulation under
the existing legal framework and that uses DLT
for transmission or storage of value belonging to
others. GFSC will authorize and supervise such
activities. The Proposal defines ‘Virtual Currency’
as follows:
“Virtual currency is 'a digital representation of value
that can be digitally traded and functions as (1) a
medium of exchange; and/or (2) a unit of account;
and/or (3) a store of value, but does not have legal
tender status (i.e., when tendered to a creditor, is a
valid and legal offer of payment) in any jurisdiction.
It is not issued nor guaranteed by any jurisdiction,
and fulfils the above functions only by agreement
within the community of users of the virtual currency.
Virtual currency is distinguished from fiat currency
(a.k.a. “real currency,” “real money,” or “national
currency”), which is the coin and paper money of a
country that is designated as its legal tender;
circulates; and is customarily used and accepted as
a medium of exchange in the issuing country. It is
distinct from e-money, which is a digital
representation of fiat currency used to electronically
transfer value denominated in fiat currency. E-
money is a digital transfer mechanism for fiat
currency - i.e., it electronically transfers value that
has legal tender status.”
The above definition indicates that virtual
currency is not given status of a fiat currency.
Although it will be a medium of exchange and
store certain value, its use and functions will be
limited (i.e. only within the community of its
users). Hence, unlike Australia, where digital
currencies have been given the status of ‘money’,
the Gibraltar government seems to have
restricted its use and function.
GFSC’s Approach in Framing the
Regulation
In framing the DLT regulations, the government
of Gibraltar has a three-fold objective; (i)
consumer protection, (ii) protecting the
reputation of Gibraltar, and (iii) general economic
benefit. In order to fulfill the above, it has laid out
the following principles, which DLT companies
will be required to follow:
1. Conduct its business with honest and
integrity;
2. Pay due regard to the interest and needs of
its customers;
3. Communicate with its customers in a fair,
clear and non-misleading manner;
4. Maintain adequate financial and non-financial
resources;
5. Manage and control risks to its business and
customers;
6. Protection of client assets and money;
7. Have effective corporate governance in place;
8. Maintain systems and security access
protocols in high standards;
9. Take steps to prevent, detect and disclose
financial crime risks such as anti-money
laundering and countering terrorist financing
(AML/CFT); and
10. Have contingency plans.
Timeline for the Proposed Regulation
The government intends to finish drafting the
new regulation in the last quarter of 2017 after
considering views and feedback from the public,
companies and associations on the Proposal. It
has proposed to amend the Financial Services

2. September 2017
(Investment and Fiduciary Services) Act, 1989
(1989 Act) and incorporate the new DLT
framework into the 1989 Act by way of an
amendment. The target date for bringing the
regulation into effect is January 1, 2018.
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Questions? Contact GAMALLP
Christina M. Gagnier
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+909.493.6447
Stephanie Margossian
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+415.692.1202