This week, regulators from the British Overseas Territory, Gibraltar introduced new STO legislation aimed at simplifying regulation across the country. Government officials now consider all initial coin offerings as security token offerings. This default setting allows the government to pass the burden of proof onto the firms hosting the events. In this manner, regulators hope to clarify confusion in the market and set standards to encourage innovation in the region.
In a recent interview, Gibraltar’s minister for digital and financial services, Albert Isola, discussed the decision and the ramifications of the change. He explained that the new legislation is more of an invitation to STOs seeking a regulatory friendly environment, rather than a snub to the utility token community. Isola stated that all firms can enjoy the security of the local market as long as they are able to adhere to the territory’s strict compliance requirements.
According to the new regulations, all blockchain crowdfunding ventures are STOs by default. Now, issuers will need to submit the proof of their tokens true use case scenarios.
The decision to move the responsibility of token taxonomy on the issuer seems like a smart one for the tiny state. It enables the country to focus its limited resources on monitoring the market, instead of debating semantics with firms.
Interestingly, the new STO regulations also introduce educational requirements for financial firm employees. Specifically, the new laws mandate that employees of all financial firms in the jurisdiction take continuing education courses on anti-money laundering practices, and the risks money laundering poses to the market. Not coincidently, Gibraltar’s University recently launched detailed courses on anti-money laundering law.
Discussing the shift in stance, Isola explained that the new regulations will help bring transparency to the market. For example, firms that want to conduct an ICO, just need to demonstrate the use case of its utility token. Regulators will examine each ICO on a case-by-case scenario. Regulators hope that the new legislation will draw more STO clients while leaving ICO clients to debate if they can provide the evidence needed to enjoy utility token status.
Isola also discussed what the future holds for his country. He acknowledged that the changes could take some time for companies to get used to. Notably, Gibraltar regulators intend to closely monitor the market over the coming months. If regulators feel the need to, they may decide to introduce separate frameworks for token sales. This new framework would provide separate legislation for ICOs versus STOs. Lastly, Isola spoke about the importance of getting the regulations correct. He explained that due to the small size of the country, there is no room for error.
No Room For Error – Gibraltar
It’s obvious that Gibraltar is ready to welcome STOs to its shores. The company has long been a financial powerhouse, despite its modest size. Hopefully, regulators are able to institute consumer protections that enable the country to maintain quality in the market. Already, the country enjoys a reputation as a blockchain haven. Now, Gibraltar is ready to take whatever steps are necessary to continue on the path of digitization in the market.