ReachExtra
While the major economies worry about the Hydra-head growth of crypto-currencies – where, new token offerings fail and, others are launched and snapped up by gullible punters – their offspring blockchain or DLT (distributed ledger technology), are becoming a force in global finance.
Essentially a ‘disruptive’ system of accountancy dealing with ephemeral assets, blockchain developed to meet a need to bring order and control to the swathe of crypto-currencies which have been ‘mined’ (created by their promoters but with a set limit to their numbers) or have emerged as ‘tokens’ from initial coin offerings (ICOs) in the ten years since the first Bitcoin was sold in October 2008. DLT stores or transfers these non-existent assets and allows users to trace the movements of asset transactions.
[In a recent symposium in Gibraltar, an expert compared the process to wine making where a single grape could be followed through the entire process of picking, fermenting, bottling and labelling to the moment it is poured from bottle to glass…]
There were calls in Europe, America and Asia for the new technology to be regulated. And, while major nations argued whether or not DLT was ‘useful’ or threatening to global financial stability, the Gibraltar Government established a regulatory format for DLT companies as part of its thrust to make Gibraltar an international hub for FinTech and some crypto-related businesses.
The legislation passed in the Gibraltar Parliament on January 1 this year, and the first of a string of DLT companies received licenses this June. A steady stream of international applicants are being processed – a lengthy procedure as applicants and the regulator explore new territories in Cyberspace.
Malta also has adopted both comprehensive blockchain and crypto-currency regulations, which came into force earlier October.
But blockchain has its critics, and in the United States – though so far it has been unsuccessful in its search for ways to regulate Cyber-finance – an internationally respected economist recently told a Congressional hearing that ‘bitcoin and other crypto-currencies represent the mother of all bubbles’, and that blockchain ‘is the most over-hyped – and least useful – technology in human history.’
But where critics of crypto-currencies – some liken the current greed for a fast profit to the Dutch tulip fiasco of the 17th century – are still in the majority, blockchain is gaining support – even in conservative Britain where a taskforce set up by the Financial Conduct Authority, HM Treasury and the Bank of England acknowledged that blockchain ‘has the potential to deliver significant benefits in financial services and other sectors’. Indeed, the UK Government has already spent more than £10 million for various distributed ledger projects.
Though the jury is still out on blockchain as the world’s financial panacea, there are pointers that, in embracing it, the Gibraltar Government made a wise move.
