Gibraltar plans to launch the first crypto stock exchange. Objective: attract millionaires

Gibraltar redoubles its bet to become international benchmark of cryptocurrencies. Four years after establishing a regulatory framework —a list of nine principles— which regulates the activity of companies that work with blockchain to store or distribute values, the Rock goes one step further with the purpose of standing out on the global map of cryptocurrencies. One not without risks and that starts, in this case, from the private sector. In October the firm Valereum announced its offer to take over 80% of the Gibraltar Stock Exchange and create a unique space: a stock exchange in which shares and financial products can be exchanged for cryptocurrencies.

The operation, which, if it came to fruition, would place a majority stake in the company known as GSX in the hands of Valereum —in fact, yesterday the firm assured that aspire already to 90%— now depends on the approval of the Gibraltar Financial Services Commission (GFSC) and would give rise, in the words of the company itself, to the “first integrated and fully regulated fiat and digital stock exchange in the world”. Waiting for the regulatory body of El Peñón to rule on Valereum’s offer, the company has revealed in recent days some keys in Wired that allow us to better understand your future plans and answer some of the unknowns.

Ambitions, opportunities… and risks

Monetize cryptocurrencies, the key. Over the last few years, cryptocurrencies have skyrocketed in value —always marked by their enormous volatility, true—, but those who own them continue to face a difficulty when they want to convert them into hard currency, transfer those digital assets to official money of A state. It can be done, but it often requires dealing with taxes and transaction fees that make it onerous to manage.

Their fluctuations mean that it is not easy to use them as collateral for a purchase operation or a loan, for example. Valereum aspires precisely to facilitate this step. How? “You can put a portion of your crypto savings into fiat, you can borrow against that and buy a house,” exemplified British businessman and financier Richard O’Dell Poulden, head of Valereum: “It makes them a more attractive asset.”

If Poulden’s plans finally come together, the GSX would continue to function as a conventional stock exchange, with the exception, yes, that, in addition to fiat (fiduciary money), it will be possible to operate with cryptocurrencies. The owner of a certain amount of bitcoins, for example, could exchange them for shares that will in turn serve as collateral to apply for a bank loan or a mortgage. To facilitate the operation, the Gibraltar Stock Exchange will have a fiduciary company. As cryptocurrencies will have been used to acquire other assets that appear in the same way —the company claims— the costly “tax liability” would not be met. After all, what is being done is a purchase of cryptocurrencies, without the need to transfer them to fiduciary money.

A wide range of currencies. In October, when announcing the offer, Valereum advanced that his desire is for the GSX to accept “the main cryptocurrencies” and cited Bitcoin, Dogecoin, Cardono, Ethereum and Tether. “They will be treated like any other currency,” he slipped. The company explains that the final list is still being prepared, but – as was the case at the end of last year – it is silent on what technology it will use to trade cryptocurrencies.

Yes, it has emerged through Wired that if the GFSC gives it the green light and Poulden’s company can close the deal, it plans to raise close to 50 million pounds -about 60.1 million euros- to invest in the infrastructure of the stock market . just a month ago Valereum reported also of another movement that could be understood as a step towards achieving its objective: the proposed acquisition of Juno Group, firm with experience in the creation of fiduciary companies.

Objective: to be a global center of cryptocurrencies. “With a nimble economy, supportive regulatory environment, corporate tax rate, and educated workforce, we are setting up the right environment for blockchain innovation.” The sentence is part of a speech given in 2019 by the Minister of Commerce of El Peñón and clearly reflects its desire to become a global center for cryptocurrencies. In addition to providing itself in 2018 with a framework for crypto companies, over the past few years it has taken steps that reflect its interest and have created the environment that has encouraged Valereum to bet on an integrated exchange.

The Gibraltar regulator has already given its placet to a dozen and a half of providers of DLT (Distributed Ledger Technology) and defends that the filtering process is rigorous and allows it to eliminate possible undesirable actors. Since the middle of the last decade, the Rock has also been the scene of different movements that demonstrate its commitment to cryptocurrencies. In 2016, for example, the Stock Exchange announced the introduction of BitcoinETI, a Bitcoin-backed security, on its list of trading instruments, although it was withdrawn not long after, in early 2017. More or less around the same dates, premiered the first Bitcoin ATM.

The big risk: a return to the past. Valereum’s move also has risks, of course. And not minors. The main one: that it ruin the effort of its regulators so that the EU remove the Rock from its list of tax havens. In its financial stability report In December, the Bank of England itself warned that “financial institutions must adopt a cautious and prudent approach” with crypto assets, and stressed: “It will be important to ensure that other significant risks are mitigated, such as the protection of consumers and investors, the integrity of the market, money laundering and the financing of terrorism”.

In addition to seeing its reputation damaged, Gibraltar could face sanctions if it gives legal approval to cryptocurrency companies linked to illicit activities. From the Rock they face the challenge with confidence and remember the steps they have taken over the last four years.

“If you wanted to do bad things in crypto you wouldn’t be in Gibraltar because the companies are licensed and regulated and they aren’t anywhere else in the world,” explained a month ago Albert Isola, Minister of Financial Services, to the newspaper The Guardian: “I don’t understand how there can be a higher risk in Gibraltar when you can go to any other European country today and run the exact same business with no supervision, no license and no regulation.”

The prize, of course, is juicy business. Valereum targets a cryptocurrency sector with a value, according to your estimates, of approximately 3.5 billion dollars.

Cover Image | Mussi Katz (Flickr) Y IamRender (Flickr)