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DeFi and Credit Risk

On Wednesday, the British overseas territory of Gibraltar, which is located on the southern tip of Spain, announced an update to existing legislation mandating enterprises dealing in bitcoin and other digital currencies to maintain the integrity of the marketplaces in which they operate.

The Gibraltar Financial Services Commission says authorized crypto enterprises must avoid "manipulation or improper influencing of pricing, liquidity, or market information, or any other behavior that is inimical to market integrity," according to a guidance note.

"We were the first jurisdiction to launch the legal and regulatory framework in 2018, and now we're the first jurisdiction to launch a framework for market integrity," Albert Isola, Gibraltar's digital and financial services minister, told CNBC.

"The more international standards for this space there are throughout the world, the more trust, usage, and acceptance we will have around the world," he continued.

Gibraltar's ambitious blockchain plans

Gibraltar is a centre for a number of businesses, including financial services and gaming, despite its reputation as a seaport and popular tourist destination. Its current step is part of a larger effort to set the standard for digital currency regulation.

Despite its tiny size, Gibraltar has a history of adopting crypto market rules. The territory, which borders Spain but is governed by the United Kingdom, first established a blockchain licensing scheme in 2018.

FTX, Huobi, and Bullish, which is sponsored by PayPal co-founder Peter Thiel, have all opened offices in Gibraltar and secured licenses from local regulators.

Executives from Binance, the world's largest cryptocurrency exchange, visited Gibraltar "a few months ago," but the company lacks a license, according to Isola. Following regulatory crackdowns in a number of nations last year, the corporation is attempting to become a friend rather than a foe to authorities.

In an attempt to become the world's first regulated bourse for share and crypto trading, the Gibraltar Stock Exchange has agreed to be acquired by Valereum, a blockchain business. It's a goal that Switzerland's SIX Swiss Exchange is likewise aiming for with the launch of a blockchain-based securities exchange.

The new rules come as a number of major world economies, including the United States and the United Kingdom, are introducing new regulations to bring cryptocurrency into the regulatory fold.

"I believe it's a sign that more and more jurisdictions are seeing the value in doing it," Isola added. "And there's a pressing need to do that since adoption is on the rise."

Gibraltar, on the other hand, is "not doing this to advertise ourselves," according to Isola, who added, "We want a very small but quality number of enterprises under our jurisdiction."

Transparency

Gibraltar has been accused of being a "tax haven" in the past. Several large British gaming companies, including as Entain and 888, have established up shop on the rocky peninsula, owing to its favorable taxation policy. Gibraltar, on the other hand, has recently moved to disassociate itself from such a reputation.

Isola claimed the area is "completely compliant with all transparency and exchange of information norms applicable in the United Kingdom," despite claims that Gibraltar is a tax haven. Isola stated that such transparency rules also apply to crypto, implying that "the hurdle to admission is high."

After reaching an agreement with the United Kingdom on tax cooperation, Spain agreed to remove Gibraltar from its list of tax havens last year. Following Britain's exit from the EU, the issue has become a stumbling block in London's negotiations with Madrid.

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