Answer ... Gibraltar’s acceptance of fintech has paved the way for innovation within Market in Financial Instruments Directive (“MiFID”) institutions, e-money firms and insurance businesses, with substantial fintech growth and development evident within each of these sectors.

Undoubtedly, the Distributed Ledger Technology Regulations have resulted in an increased amount of global attention, with the pool of licensed firms increasing and the industry maturing. Established companies in the electronic money and payment services sectors have similarly looked to make inroads into the fintech industry and capitalise from Gibraltar’s economic growth.

Answer ... The types of businesses and products currently existing in Gibraltar are varied and wide ranging, with offerings that include the custodianship of virtual assets, secondary market providers (eg, virtual asset exchanges), e-money institutions, payment service providers, MiFID firms offering alternative investment products, insurance providers and crypto-funds. All of the above are further incentivised by the government of Gibraltar’s pro-financial services innovation stance and intentions to expand the activities that would fall within the scope of the fintech regulatory landscape, opening the door to increased business opportunities.

Answer ... Often as private limited companies in accordance with the Gibraltar Companies Act 2014 or as protected cell companies established under the Protected Cell Company Act 2001, common in the funds and insurance industries.

Answer ... The financing of fintech firms varies substantially. Many firms within the industry have benefited from investment by both domestic and international investors, profited due to their holdings of virtual assets as they gained popularity or used their existing business to finance their expansion into the fintech sector.

Although currently unregulated by the FSC, many firms have conducted initial coin offerings as a means of funding or developing their business platforms. In recent times security token offerings – which are regulated under legacy frameworks such as MiFID, and the EU Prospectus Regulation (2017/1129) – serve as additional avenues for fintech companies seeking to raise capital.

Answer ... Firms of varying size, scale, complexity and business phase – including globally recognised, more traditional financial services businesses – are now in the process of expanding their services into the fintech industry.

Gibraltar was the first jurisdiction in Europe to create regulations specifically designed for distributed ledger technology (“DLT”) service providers and as highlighted above, this has already attracted established, high-profile cryptocurrency exchanges and wallet service providers. Start-up businesses have also benefited from this environment, with financial service providers across the fintech industry similarly being drawn to the jurisdiction.

The government of Gibraltar has been very supportive in the development of the DLT industry and the FSC’s DLT team has shown advanced technical knowledge of DLT, as well as the wider fintech industry, while remaining extremely approachable and willing to engage in open dialogue with applicants throughout the application process for DLT providers or any other regulated activities.

Answer ... This will often depend on each business case but, it is not uncommon for start-ups to outsource back office functions. The FSC has published a guidance note on outsourcing arrangements, setting out the guiding principles for licensed firms that may look to outsource any business functions.

Any licensed firm, in accordance with the FSC’s corporate governance requirements, must adhere to ‘mind and management’ criteria which include ensuring decision making pertaining to the running of business on a day-to-day basis and various approvals (e.g., operational policies and key contracts) being conducted from Gibraltar.

Broadly, this means that fintech businesses that are regulated by the FSC must have ‘fit and proper’ persons approved by the FSC undertaking key roles within the business. However, not all of these individuals need be based in Gibraltar; the overriding requirements are that the ‘four eyes’ (two individuals) criterion met on a continual basis, and that individuals assigned to fulfil these roles do so over the entire operations of the firm.