Gibraltar considers whether to amend funds regime in light of increased crypto investments

The Gibraltar Financial Services Commission has said it has no objection to experienced investor funds investing in digital assets provided that regulations are complied with

What has happened?

The British Overseas Territory is considering whether changes are needed to the experienced investor funds (EIF) regime catering for EIFs firms investing in digital assets.

What does this mean?

In a statement, the Gibraltar Financial Services Commission (GFSC) said that it had noted "increased activity" with respect to EIFs seeking to invest in cryptocurrencies and similar distributed ledger technology-based tokens.

"The GFSC is currently considering with HM Government of Gibraltar whether any legislative changes are required to the existing EIF regime specifically catering for EIF firms investing in digital assets", the GFSC said.

It added that, provided that EIF regulations are complied with, it has no objection to EIFs investing in digital assets.

However, because of the risks associated with such investments, the GFSC expects EIFs to consider various matters, including whether the fund's offer document appropriately disclose the risks associated with investing in digital assets and whether security arrangements are clearly explained, especially how private keys will be safeguarded.

Measures to protect against cyber threats also need to be considered.

The GFSC also expects directors to consider if there is a requirement or potential future need for a depositary under the Alternative Investment Fund Managers Directive and, if the fund is accepting subscriptions, how it will comply with anti-money laundering legislation and identify ultimate beneficial owners of any subscribing entities.

Valuation policies should also be explained to investors in sufficient detail.

Next steps

If you want to take advantage of blockchain's huge potential and disruptive impact, while avoiding falling foul of ever-developing regulatory and legal requirements, visit our Hogan Lovells Engage Blockchain Toolkit.

Contacts
John Salmon
Partner
London
Languages English
Topics Blockchain

 

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