GFSC DLT license — And What It Will Mean For Plutux
The Gibraltar Financial Services Commission (GFSC) has taken a substantial first step in providing regulatory clarity and support for the blockchain and cryptocurrency industries. Beginning January 1st, 2018, the GFSC has required that businesses using distributed ledger technologies (DLT) obtain a license to be authorized as a provider of such services.
The Need for Regulation
The GFSC’s regulation is not without precedent or need. Currently, over 1,663 cryptocurrencies have a worldwide market cap of over USD 300 billion. Every day, traders exchange these currencies at over 12,000 different markets, most of which are completely unregulated. This lack of governance leaves the industry, and consumers, at risk.
Cryptocurrencies, in themselves, do not require regulation. In fact, their decentralized nature is their major appeal for many consumers. However, there is a pressing need to regulate DLT operators who manage digital assets (currencies or tokens) on behalf of institutions or consumers. This is primarily to ensure that DLT providers have considered all facets of running and managing such assets and to verify the provider is part of a bona fide, reputable business.
The Nine Commandments
To ensure the legitimacy of DLT providers, the GFSC follows an intensive and independent review of each business. Of utmost importance is that the DLT providers understand the risks of operating in the digital asset management industry, and have the means to address all facets of this uncertain industry.
Like Isaac Asimov’s Laws of Robotics, the GFSC has set these immutable tenets for such businesses:
- A DLT Provider must conduct its business with honesty and integrity.
- A DLT Provider must pay due regard to the interests and needs of each and all its customers and must communicate with its customers in a way which is fair, transparent and not misleading.
- A DLT Provider must maintain adequate financial and non-financial resources.
- A DLT Provider must manage and control its business effectively, and conduct its business with due skill, care, and diligence; including having proper regard to risks to its business and customers.
- A DLT Provider must have adequate arrangements in place for the protection of client assets and money when it is responsible for them.
- A DLT Provider must have adequate corporate governance arrangements.
- A DLT Provider must ensure that all systems and security access protocols are maintained to appropriate high standards.
- A DLT Provider must have systems in place to prevent, detect and disclose financial crime risks such as money laundering and terrorist financing.
- A DLT Provider must be resilient and must develop contingency plans for the orderly and solvent wind down of its business.
These tenets, along with a full review of the DLT provider, acts as an independent audit of the business to ensure stability, security, and, most importantly, financial responsibility.
What Does This Mean for Plutux?
The Plutux team is currently in the process of obtaining a Distributed Ledger Technology license from the GFSC. Once the GFSC approves the DLT application, Plutux can then leverage the regulatory framework to differentiate our forthcoming exchange as a credible and secure business — a distinction that will differentiate Plutux in the already crowded cryptocurrency exchange market. Furthermore, meeting compliance standards ensures that Plutux will maintain high standards of compliance and transparency, as well as robust security protocols. The DLT regulations are written using principles-based and outcome-based approaches, allowing Plutux to thrive in a complex and rapidly changing industry, with the added benefit of drawing greater investment and increased institutional support.
Finally, this heightened regulation also provides an opportunity for the blockchain industry to benefit from better support for the existing financial ecosystem. Hostile regulatory policies have placed cryptocurrencies and other tokens under constant fire — the GFSC’s framework could provide much-needed credibility in an ecosystem still learning to conduct business fairly and efficiently.
Plutux is the first cryptocurrency to cryptocurrency exchange to empower traders with customizable and user-friendly advanced trading features in a mobile-centric, gamified, regulated and ethical environment. Upon acquiring a securities license, Plutux will develop into a securities exchange enabling the tokenization of new and traditional securities.
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