Regulation is sometimes positioned as the enemy of innovation, an antagonistic force that reduces progress in the name of bureaucracy. However, when implemented sensitively and proportionately, regulation can strengthen a private sector’s reputation by creating the conditions necessary for businesses to focus on and enhance innovation.
Getting this right means working with entrepreneurs and providing them the opportunity to innovate and experiment while also enforcing standards that promote proper corporate governance and prevent illegal activity. Through ensuring robust controls, today’s evils such as money laundering and terrorist financing can be aptly combated. An open dialogue between regulators and businesses makes companies and entrepreneurs stakeholders in building a new and open ecosystem.
A critical aspect of proactive regulation involves not making new, emerging technologies subject to compliance with existing legislation. Much of this regulation presumes that money is a physical good relying on central banks and complex international agreements to maintain value. Regulation of distributed ledger technology needs to start from the perspective that the technology is creating a fundamentally new source of value and a new way of doing business.
Through a thoughtfully selected working group with participants from the private sector, the government and regulators, Gibraltar began considering the regulatory process for DLT. We then specifically built our regulation from first principles for a digital environment, avoiding the temptation to be restrictive or draft regulation aligning to a phase of technology maturity that risks being outdated. This approach is based around principles rather than exacting standards, allowing us to uphold our commitment to high regulatory…