Collaboration the key to reaching consensus on blockchain regulation

Hon. Albert Isola M.P. - Minister for Commerce of Gibraltar

Drawing people together from across the globe, New York blockchain week provided great insight into the varying approaches jurisdictions are taking to build comprehensive blockchain hubs supported by regulation. On Monday the 13th of May, I was pleased to take part in a special Consensus panel discussion entitled ‘Build It and They Will Come: Global Blockchain Hubs Deep Dive’, with representatives from Abu Dhabi, Luxembourg, the Bahamas, and New York.

I was joined on stage by Wai-Lum Kwok, Executive Director (Capital Markets), Abu Dhabi Global Market; Karen Bhatia, Senior Vice President Technology, New York City Economic Development Corporation; Emilie Allaert, Head of Operations and Projects at the LHoFT Foundation (Luxembourg House of Financial Technology), and Don Cornish, Island Administrator at the Bahamas Government. The panel was moderated by Loretta Joseph, blockchain consultant for the OECD.

Together, we shared our own unique perspectives on the evolution of the global blockchain ecosystem, and the importance of regulation to its sustainable development. When questioned on the perceived race towards innovation for different jurisdictions to accommodate DLT in their economies, myself and my fellow panelists agreed that while there is healthy competition, there is also a firm commitment to share knowledge and collaborate. We should not be siloed in our respective efforts to master DLT innovation, and we concluded that a breakthrough technology like DLT merits a new approach to achieving some semblance of international standards, so together, we can accelerate the ascent of blockchain technology in our economies.

The panel also made for a lively and engaging discussion on how to strike a balance between building regulation of Distributed Ledger Technology (DLT) which facilitates innovation, whilst ensuring it continues to meet rigorous regulatory standards. We detailed our respective experiences interacting with a wide range of projects, and can speak with confidence and clarity on what jurisdictional attributes they value most. From Gibraltar’s point of view, our jurisdiction’s agility and reputation have helped to copper-fasten our credentials as a destination of choice for blockchain companies. Reputation is important to us, and today Gibraltar is entirely compliant with every single EU Directive in financial services. We want to welcome companies that value reputation as much as we do, who welcome being regulated. We don’t apologise for doing things properly. We have built our framework around nine core principles, while also giving our regulator certain discretionary power.

When it comes to attracting ambitious blockchain projects to a jurisdiction, all panellists agreed on the importance of taking the needs of industry into consideration. When deciding on where to set up and build their DLT projects, project leaders take a measured approach to assessing what jurisdiction will provide the most fertile ground for their platform to thrive, as indeed, they should. The main prerequisite was a supportive regulatory environment. Gibraltar has advocated for a flexible, adaptive approach to regulation, which creates a favourable business environment for  businesses to grow. Commonalities also included developing a strong banking sector that is firmly in tune with the AML and KYC requirements blockchain businesses must adhere to. Additionally, we all noted the value of building a community of accountants, auditors, and lawyers that are highly proficient in providing services for fintech and blockchain focused enterprises.

Unsurprisingly, the theme of collaboration was ever-present in the different approaches taken by our respective jurisdictions. I was able to speak at length on Gibraltar’s principles-based approach, which has been heavily informed by the needs of industry. Before Gibraltar introduced our landmark DLT regulation in January 2018, regulators and industry representatives were busy behind the scenes setting out a framework that provided the necessary levels of security and assurance for regulators, while also providing projects with space to innovate. Engagement between businesses and regulators has been pivotal to the creation of a DLT regulatory framework that continues to provide a road to market for quality blockchain projects.

On the topic of quality blockchain projects, I was pleased to welcome David Mercer, CEO of LMAX Digital to the stage. David gave insight into why LMAX chose to set up operations in Gibraltar. It was an assured endorsement of our supportive regulatory framework, and demonstrated the attributes that have helped Gibraltar assertively become a destination of choice. David highlighted the stringent process involved in attaining a full DLT licence in Gibraltar, a process that we stand proudly behind.

We all acknowledged that our jurisdictions are still learning, still looking to improve our DLT environments. Nobody has perfected the best DLT environment. We can all learn from each other, share different perspectives and insights. Achieving consensus on DLT regulation will be challenging, as each jurisdiction has a different appetite for risk. However, fundamentally, we all want to maintain and strengthen relationships with other nations that share our vision of a future built across DLT.