Gibraltar Will Take Market-Driven Approach to ICO Rules

Gibraltar may be moving to regulate initial coin offerings (ICOs), but officials say it will be up to the market to determine what a "good" token sale looks like.

The U.K. overseas territory announced that it was drafting ICO regulation earlier this month, which will include the implementation of a system for "authorized sponsors" that will be tasked with managing compliance. Gibraltar's government outlined a tripartite approach that would address "the promotion, sale and distribution of tokens," create a well-regulated secondary market related to tokens and establish standards for the provision of advice relating to token investment within its jurisdiction.

"We don't see a place for us as a regulator, or indeed Gibraltar as a jurisdiction that makes its own laws, for saying what 'good' looks like in token sales," Sian Jones, a senior advisor to the Gibraltar Financial Services Commission (GFSC), told CoinDesk in an interview Tuesday.

Instead, regulators would "rather let the marketplace of authorized sponsors come up with possibly a number of different options of what good looks like," Jones said.

Jones explained that a one-size-fits-all regulatory approach would be inappropriate for the blockchain funding model, and that Gibraltar is instead developing a set of principles for best practice. With these principles, each authorized sponsor will be able to "come up with its own methodology" to apply to the ICOs or tokens that they sponsor.

Asked if these measures implied a kind of self-regulation on the part of sponsors, Jones replied:

"I don't know that I would reach as far as saying it's self-regulatory, but it certainly resonates – the idea that the marketplace will determine what a good ICO looks like."

Paul Astengo, senior finance executive at the Gibraltar Finance Centre, told CoinDesk that the timing of the territory's ICO regulation is a product of its efforts to "keep abreast of developments" in the blockchain and cryptocurrency industry.

He explained that the legislation is the logical next step after Gibraltar's Jan. introduction of a license for companies working with distributed ledger technology, which has made it an appealing destination for blockchain startups.

Likewise, Astengo said, "We want to welcome good quality companies, we want to welcome people that wish to operate that are as concerned for their reputation as we are for ours. And we want to make sure that all of the different elements for this regulatory framework will be enough to support what they're trying to achieve for their firms."

Roadmap for crypto fund rules

Astengo and Jones also confirmed reports that Gibraltar is considering regulation related to investment funds associated with cryptocurrencies and tokens.

"We are reviewing the inclusion of crypto-related assets in funds in our investment funds," Jones said."I think it's fair to say that our thinking is not yet as developed as it is around token sales. So it's a matter that's under review right now." Officials expect to iron out additional details on the matter later this year.

Both officials view Gibraltar's forthcoming ICO legislation as one element in a regulatory framework that will continue to evolve parallel to the progression of the blockchain and cryptocurrency industry.

"We see blockchain and distributed ledger technology as a long game," Jones said. "We see this as something that will have an important and profound effect on trust relationships with both customers and enterprises, citizens and government, and therefore something which is highly sustainable."

Gibraltar flag image via Shutterstock