Gibraltar Minister for Digital and Financial Services Albert Isola (Camomile Shumba/CoinDesk)
Gibraltar’s financial regulator is exploring whether it needs to further regulate stablecoins and decentralized finance (DeFi) lending after the recent collapses of Terra and crypto lenders like Celsius Network.
The Gibraltar Financial Services Commission (FSC) wants to bring decentralized finance lending and stablecoins into “sharp focus,” William Gracia, head of distributed ledger technology (DLT) and markets at the FSC said Tuesday during “Gibraltar Day,” an event in central London to celebrate the British overseas territory's progress of blockchain and DLT within its borders.
The price of the then-$18 billion algorithmic stablecoin terraUSD (UST) collapsed and caused the crypto market to melt down and lose billions of dollars in a month, which then triggered the fall of crypto hedge fund Three Arrows Capital. Meanwhile, lender Celsius Network and crypto brokerage Voyager Digital froze withdrawals and suffered severe losses.
These events got the attention of regulators around the world, with the U.K.’s Financial Conduct Authority saying it would consider the collapse of Terra in its planned stablecoins rules while European Union lawmakers added new stablecoin provisions to their Markets in Crypto Assets legislation.
“In order for it to be a long-term sustainable business industry for Gibraltar, consumer protection needs and the protection of the reputation of Gibraltar needs to be at the forefront of what we do that means applying higher standards and best industry practices to ensure the continued success story of the DLT framework,” Gracia said.
The British overseas territory already has its Financial Services (Distributed Ledger Technology Providers) Regulations 2020 and recently added a 10th guiding principle that crypto companies have to follow which focuses on maintaining market integrity. It also has a licensing regime for DLT which in the past has been accused of being tough for firms to receive.
“After some time of continuously punching above our weight I think we have earned a heavyweight title,” Gracia said, reflecting on the country’s crypto achievements.
Last December Gibraltar said it planned to integrate blockchain technology in its systems.
The country is working on developing its regulatory framework for crypto and is not afraid to look to other countries for guidance, Albert Isola, Gibraltar's minister for digital and financial services, said in an interview with CoinDesk.
“I have always said unashamedly [that] if somebody is doing it better than us we will have a look and copy you. We want to get to a good set of regulatory principles which we can comply with, introduce and keep the bad actors away from our shores” Isola said.
Read more: Gibraltar's Government Targets Crypto Market Manipulation With New Rules