The surge in interest in Gibraltar after the DLT legislation (Distributed Ledger Technology) and the ICO regulations significantly impact the country’s funds industry. Because of this and many other things, Gibraltar is considered one of the go-to locations for anything involving cryptocurrency or blockchain technology.
Gibraltar is one of the very few jurisdictions in the world where it is feasible to open a bank account for such activities. This makes it a given for entrepreneurs who wish to establish funds for investing in cryptocurrencies to consider Gibraltar as a jurisdiction in which to house their funds.
Gibraltar and Cryptocurrency
When establishing crypto funds, there are a few challenges, not the least of which is the volatility of the cryptocurrencies themselves. Investors are prone to lose fortunes as they are to make them by investing in this market. There is a demand among investors to have exposure to this asset class to be placed among their asset allocation’s riskier end. Thus, the Gibraltar Funds and Investment Association (GFIA) has created a special crypto fund committee to address these issues.
The committee’s first decision was to encourage Gibraltar’s industry to use Experienced Investor Funds (EIFs) as the regulatory rule for crypto funds, which can cut some costs. GIFA is set to ensure that these practices are not carried out in the crypto funds sector, other than in the few restricted cases where the fund includes only the money of a person and that is of the promoter.
The industry agrees that investors in cryptocurrency should be allowed the regulatory infrastructure and the protections that the EIF’s regulations deliver, along with the support of numerous EIF directors, fund administrators, and auditors, many of whom are obviously absent in the creation of some private funds.
Crypto Funds and the Code of Conduct
The crypto committee has also been figuring out an extension of the GIFA Code of Conduct to include aspects that should be considered by those involved in the sector when they are creating crypto funds. Among other issues, the code will manage custody of crypto assets, valuation, security, and corporate governance.
Although it may be probable that some funds drop in value because of the fluctuations of cryptocurrencies, GIDA wants to make sure that investors in Gibraltar crypto funds will be protected from cyber-security threats and danger associated with sub-effective corporate dominance.
Even though most of the morals that relate to the protection of investors in crypto funds can be drawn from the Code of Conduct, new regulations are set to help practitioners apply these principles to crypto assets. One instance is the provision that cryptocurrencies should be stored in digital wallets with multi-signatory functions.
Comply or Explain
According to GFIA, some of these principles should be included in crypto fund regulations as well. As it is with numerous other codes like this, the principle with the Code of Conduct is to ‘comply or explain.’
Simply put, the code recognizes that there may be situations in which the regulations that it sets out cannot be applied to an individual situation, and so, in that particular circumstance, an explanation should be delivered as to why the principles of the code have not been respected and followed.
The interest in Gibraltar funds has been initiated in other regions as well: traditional securities funds and algorithm funds are also being created. The funds industry is said to take advantage of this increasing interest, more so since funds professionals usually have the best abilities to make the ICO and DLT work. In short, the government of Gibraltar should be congratulated for delivering the regulatory infrastructure for this critical sector as per many in the cryptocurrency community.