How to get a DLT license in Gibraltar

Elena Mashina

Table of contents

The cryptocurrency business is currently quite promising and provides many advantages, but only for those crypto projects that operate within the framework of the law. An increasing number of entrepreneurs planning to open a cryptocurrency exchange, launch an ICO project or launch a cryptocurrency exchanger are choosing “profitable” jurisdictions that provide such projects with the opportunity to exist and develop favorably.

Who regulates the process for obtaining a DLT license?

The regulation of cryptocurrency and blockchain projects in Gibraltar is carried out by the GFSC (Gibraltar Financial Services Commission). Back in 2017, the Financial Services Law, developed and adopted by the authorized regulator, GFSC, began to operate. This is one of the main laws governing financial activities in Gibraltar. It simultaneously supports new blockchain projects and reduces the risks of investor fraud. The authorities have provided for the receipt of a special permit in order to legally conduct business, any company using blockchain technology must obtain a DLT license - permission to provide various services in the electronic currency market.

In early 2018, Gibraltar implemented the Distributed Ledger Technology Regulatory Framewokk - DLT Framework, which is a kind of blockchain regulatory framework.
The specifics of regulating DLT activities in this jurisdiction are regulatory flexibility and advocating for the expectations and interests of clients.
DLT license authorizes the following business:

Opening and functioning of crypto-exchanges
Opening e-wallets
Custody services for clients' assets (provision of custody services)
Markets using DLT to facilitate the sale and purchase of various goods and services

What are the benefits of purchasing a DLT license?

Low tax rates and a well-defined taxation system
The regulation of the crypto business is transparent. The legislation fixes 9 requirements (they will be discussed below), without which the project will not receive a license.
Detailed consideration of the business plan and giving individual recommendations. The amount of the authorized capital, payment of fees and charges are directly dependent on the specifics of your business model.
Gibraltar is an attractive and prestigious jurisdiction that attracts the owners of large crypto projects. Therefore, it is quite interesting to develop in a jurisdiction in which experienced entrepreneurs, full of ideas, open a business.

DLT clearance process

The DLT licensing process in Gibraltar includes several stages, they are quite complex and, that’s why, you should contact the qualified lawyers of Law Firm A4 in order to eliminate any inaccuracies in the preparation of the application and filing of documents. So, after drawing up an application to the competent authority - the Gibraltar financial services commission the regulator conducts a risk assessment and builds a forecast to determine the financial success of the project and, in accordance with the results of the assessment, sets the minimum start-up capital. Further, the business project is assigned one of three difficulty ratings.

The procedure for obtaining a license is as follows:

Company registration in Gibraltar. A person registering as a DLT must register, form the authorized capital.
Compliance with the requirements for the execution of documents to be posted on the platform: AML / CTF, KYC, Confidentiality policy and go through the AML procedure approved by the regulator itself. The Gibraltar authorities are flexible in opening such projects, but since you are going to carry out financial activities, it may be related to money laundering and terrorist financing. Therefore, verification is mandatory.
Consideration of the application and making a decision. DLT provider is checked for compliance with 9 principles of the regulator:
- Honest and conscientious business conduct;
- Taking into account the needs and interests of each client. Providing customers with services that are fair, clear and not misleading;
- Maintaining a stable financial plan;
- Effective management and control of the business, as well as due regard to risks in the process of conducting professional activities;
- Availability and efficiency of financial mechanisms for the client;
- Availability of mechanisms for reliable corporate management;
- Ensuring confidentiality and security in accordance with established standards;
- Availability of mechanisms to prevent and identify the risks of committing crimes in the field of finance;
- Stable status of DLT provider, availability of a developed action plan in case of necessity to close your business.

Terms of license issuance

The term for issuing a DLT license is determined in accordance with the technical document of the GFSC and is counted from the moment the applicant submits a package of documents to the regulator. Thus, the commission undertakes that the period from the receipt of the package of documents to the receipt of the license is no more than 3 months ( https://www.fsc.gi/dlt - DLT Application Process and Fees document ) .

Taxation

Gibraltar taxation for cryptocurrency projects is one of the benefits of doing crypto business. Cryptocurrency as such is tax deductible, so virtual finance projects only have to pay 10% corporate income tax. In addition, capital gains and dividends are tax deductible. In the event that there is any foreign income derived from the activities of the company that is not related to what the DLT license covers, this income may also be taxed. Law Firm A4 advises numerous projects in Gibraltar for the efficient implementation of cryptocurrency business. With a rich portfolio of successful DLT licenses in Gibraltar, our lawyers will be happy to assist you in obtaining your license.

Summing up, it should be noted that the process of obtaining a DLT license is complex. It is necessary to comply with the requirements of the regulator and submit the entire package of documentation and in the proper form. Also, you should pay attention to the taxation procedure, which is quite democratic in comparison with other jurisdictions. In the aggregate, it is possible to comply with all the requirements, but this requires a detailed study of the regulations of this jurisdiction, therefore we suggest entrusting this issue to the professional lawyers of A4 Law Firm.