Gibraltar is currently reviewing a bid by Valereum, the blockchain company, to take over the Gibraltar Stock Exchange (GSX) in the coming year. This seemingly innocuous move promises to have immense ramifications globally as it would be the world’s first exchange that would permit the trading of cryptocurrencies along with conventional bonds and stocks. Gibraltar’s move to become a global cryptocurrency hub is bold since the financial sector accounts for around one-third of the country’s $3.2 billion GDP. The country stands to lose a lot if the experiment fails because it would suffer reputational damage and also face diplomatic sanctions that could hurt its economy.
Going Against the Global Trend
Countries like the UK and China have taken the conservative route to deal with crypto assets by either banning them or warning investors against investing in them. Gibraltar has gone against the trend by committing itself to regulate cryptocurrency in an attempt to ensure that it stays relevant as a financial hub in the days to come. The move is also significant because it comes in the background of its struggle to shake off its notorious reputation as a global tax haven. Gibraltar’s minister for digital, financial services, and public utilities, Albert Isola, observes that Gibraltar was indeed a tax haven some two decades back, it has changed its policies on tax and information sharing to root out corrupt players and assure investors. He says that the proposed move to regulate cryptocurrencies is another move in the same direction.
Big Overhaul of the Exchange Required
As per Crypto News, Gibraltar has until now approved 14 cryptocurrency and blockchain companies for its new licensing regime. The initiative is one of the main reasons for Valereum selecting Gibraltar as its base for its attempt to harness a cryptocurrency sector valued at $3.5 trillion. Explains Richard Poulden, Valereum’s chairman, it would be a major task to realign the exchange. It is because it would need Gibraltar’s regulations on trading cryptocurrency on the exchange to change. He added that the company, which is focusing on providing technology for linking conventional currencies to crypto-assets, would rely on technology, not people, to identify bad actors, according to a report in The Guardian.
Poulden says conducting checks on cryptocurrency for money laundering is not greatly different from doing it for other currencies. Identifying the source of the money is often easier because the use of blockchain technology permits you to see where the money has come from with pinpoint accuracy. Gibraltar’s move is being watched closely by many other countries because if it proves successful, many others will try to follow the same path because there’s no doubt that cryptocurrency is a commodity whose value is steadily increasing.
However, experts warn that Gibraltar could face international sanctions if the approved crypto firms facilitate money launderers and criminals choose the anonymity of crypto assets. All major global financial regulators are already worried about the impact of cryptocurrency on investor and consumer protection, money laundering, market integrity, and terror financing. With a high level of skepticism regarding crypto assets, Gibraltar’s move to welcome it is facing intense scrutiny.