The British overseas territory might soon host the world’s first integrated exchange, where traditional bonds and major cryptocurrencies like bitcoin and dogecoin can be traded side by side.
It’s a risky step for a territory with only 33,000 residents, where the financial sector – which accounts for almost a third of Gibraltar’s £2.4 billion GDP – is supervised by an 82-strong regulator. If all goes according to plan, the enclave might become a worldwide cryptocurrency hub; if the small team of regulators’ controls fail, the enclave faces reputational harm and, eventually, international penalties that could jeopardise its economy.
While governments such as China and the United Kingdom have either prohibited or explicitly warned against investing in crypto assets, Gibraltar has defied the trend, committing to formally regulate cryptocurrencies in order to secure the territory’s future as a financial centre. It comes as Gibraltar battles its reputation as a global tax haven, with the government suing a Spanish newspaper in an attempt to improve its international position.
Ex-Sirius Minerals chairman Richard Poulden chose Gibraltar for Valereum’s crypto-exchange business, and Gibraltar’s authority has authorised 14 cryptocurrency and blockchain enterprises for its licencing system so far. Valereum, he claims, is attempting to capitalise on a cryptocurrency market worth $3.5 trillion (£2.6 trillion) – approximately the total value of all companies listed on the London Stock Exchange.
Experts have warned, however, that if Gibraltar’s regulators end up giving legal approval to crypto firms that – even inadvertently – give a pass to money launderers, black market criminals, or kleptocrats who prefer the anonymity of crypto assets – Gibraltar could face sanctions from countries such as the United States.
It comes as key global financial regulators, including the Bank of England, express alarm about the rapid growth of crypto assets and the possible ramifications for consumer and investor protection, market integrity, money laundering, and terrorist financing.
Due to lax anti-money laundering (AML) procedures, the world’s money laundering and terrorism financing watchdog (FATF) has placed Malta on its grey list for lacking fundamental financial safeguards. It has the potential to severely harm Malta’s economy and serves as a strong warning to other governments and territories that may be tempted to relax laws.
Meanwhile, Singapore has had to reverse its decision on Bitget, a separate crypto exchange. It stopped the exchange earlier this month for marketing a digital currency that was embroiled in a high-profile branding issue, reportedly maximising revenues by using an unlicensed image of K-pop band BTS.
The Gibraltar Financial Services Commission did not respond to a request for comment on the Valereum transaction.