Crypto License in Gibraltar

Gibraltar cryptocurrency regulation

In 2018, Gibraltar became one of the first jurisdictions to adopt and implement the Distributed Ledger Technology Framework (DLT Framework), which provides licensing requirements for cryptocurrencies and other blockchain-based businesses. Today, Gibraltar continues to actively develop legislation to ensure the integrity of crypto-businesses and encourage the development of blockchain-based products and services.

The Financial Services Act passed in 2019, is the primary legislation regulating cryptocurrency companies in Gibraltar. This law establishes 10 principles for the regulation of crypto-businesses and requires all DLT providers to conduct their economic activities in good faith to maintain the continuity of the market's reputation.

Under the Financial Services Act, cryptocurrency companies must obtain a license from the GFSC to operate in Gibraltar. A DLT Provider license is a license issued under Section 8 of the said Act to conduct the controlled activity of providing distributed ledger technology services. The process of obtaining a license involves a thorough assessment of the business model, security measures, and compliance procedures. In Gibraltar, the following cryptographic activities are subject to licensing:

• crypto asset exchange or exchange services;
• crypto asset management services;
• crypto asset wallet providers;
• token issuance and management services;
• crypto asset advisory services.

Despite Gibraltar's withdrawal from the European Union with the UK, its anti-money laundering (AML) regulations remain aligned with the EU's Fifth and Sixth Anti-Money Laundering Directives (AMLD5 and AMLD6). This means that DLT businesses in Gibraltar must comply with requirements such as the proven competence of senior management and the implementation of customer due diligence (KYC) procedures and other internal policies aimed at identifying and mitigating risks associated with customers and their countries of domicile.

In addition to specific cryptocurrency regulation, cryptocurrency transactions in Gibraltar may also be subject to other relevant laws and regulations, including:

1. Proceeds of Crime Act (2015, updated March 2021). The law regulates anti-money laundering and counter-terrorist financing measures by requiring cryptocurrency companies to implement robust anti-money laundering procedures and customer identification procedures (AML and KYC) to prevent illegal financial activities.
2. Data Protection Act (2004, updated October 2019). Cryptocurrency companies must comply with the Data Protection Act to ensure the privacy and security of personal data collected and processed as part of their operations.
3. Companies Act (2014, updated January 2022), which governs the registration, management, and reporting requirements for companies operating in Gibraltar.
4. Consumer Protection Legislation. The Consumer Protection Regulation ensures that customers are adequately informed and protected when transacting in cryptocurrency or using cryptocurrency services.
5. Intellectual Property Regulation (2021). Cryptocurrency companies may be interested in considering intellectual property laws when developing and protecting their technology, trademarks, or other intellectual assets.

It is important for cryptocurrency companies operating in Gibraltar to comply with the relevant laws and regulations applicable to their specific activities. The Gibraltar Financial Services Commission (GFSC) and other regulatory bodies monitor and enforce compliance with these laws to ensure that the cryptocurrency ecosystem in Gibraltar is secure.

Company registration in Gibraltar

To apply for a DLT provider license, company registration in Gibraltar is required. One or more foreigners can set up a private limited company, choosing this as the most common legal business structure. This requires registering the company with the Gibraltar Registration Chamber, which usually takes about a week. The authorized capital of the company is determined based on a business plan.

The documents required to register a company are:

• articles of Association of the company;
• a detailed business plan including financial projections;
• identity documents (passport or other identification document) of the founders and directors;
• a document confirming the address of residence (e.g. bank account statement or utility bill received within the last three months);
• a power of attorney if the company is established remotely.

Requirements for a private limited company that plans to engage in DLT-related activities in Gibraltar include:

1. Having at least one shareholder of any nationality, with no residency requirement in Gibraltar.
2. Appointment of at least one director of impeccable reputation who will actively participate in the company's business activities, with no residency requirement.
3. Opening a corporate bank account with a local bank.
4. Hiring at least two employees in Gibraltar, one of whom must be a key employee who is not a director.
5. Hiring a company secretary.
6. Establishment of a business website.
7. Having an operating platform.
8. Having a registered office in Gibraltar.

If the documents are not in English, they must be accompanied by a notarized translation.

Obtaining a crypto license in Gibraltar

The standard procedure for obtaining a GFSC crypto license includes:

1. Preparing and submitting an application, which should contain all necessary information about your company, including a business plan, description of operations, financial information, and compliance policy.

   Information about the competence of the founders and directors must also be included. Each founder and director of the company must provide:

   • a certified copy of proof of identity;
   • a certified copy of proof of residence (e.g. utility bills);
   • a certified bank statement;
   • two professional letters of recommendation;
   • proof of source of funds;
   • certified proof of no criminal record;
   • CV showing previous employment;
   • certified copies of educational diplomas.
2. Your company must meet certain requirements set by the GFSC. This may include verification of the reputation and goodwill of the company's directors, verification of financial performance, and verification of compliance with anti-money laundering and anti-terrorist financing measures.
3. Documentation preparation. You will need to provide various documents including articles of association, governance and management information, business model descriptions, compliance systems, and other required documents.

4. Payment of fees associated with processing the license application.

   The fee for obtaining a crypto license in Gibraltar depends on the complexity of the business you plan to operate. For example:

   • crypto asset advice - £5,000 (approximately USD 6,555);
   • simple blockchain projects (crypto asset wallet, token issuance, token management) - £10,000;
   • ICO projects - £20,000;
   • crypto asset management - £25,000;
   • crypto exchange operator - £30,000;
   • crypto asset exchange - £50,000.

   The license must be renewed annually.

   In addition, there are application fees, inspection fees, registration fees, and several other fees that are paid during the licensing process.

5. Review and consideration of the application, including verification of information provided and consideration of eligibility.
6. Issuance of a crypto license in Gibraltar. Typically, a license is issued within 9-12 months.

It is important to note that specific requirements, procedures, and fees may change over time. Therefore, it is recommended to contact the GFSC directly or the legal advisors at Gofaizen & Sherle for the latest information and guidance on obtaining a license.

Gibraltar Crypto Tax

Gibraltar does not levy a specific tax on cryptocurrencies. However, cryptocurrency companies in Gibraltar are still required to adhere to general taxation principles and pay the general taxes imposed by the Internal Revenue Service. The tax year in Gibraltar runs from July 1 to June 30, and tax returns must be filed accordingly by the due dates.

Gibraltar is renowned for its low taxation and offers certain tax advantages to cryptocurrency businesses. For example, Gibraltar does not impose taxes on capital gains, interest, and dividends. As of April 1, 1997, Gibraltar also discontinued the estate duty. In addition, Gibraltar's taxation system does not include value-added tax (VAT). Corporate tax in Gibraltar is governed by the Income Tax Act 2010 and applies to profits derived from income accumulated and earned in Gibraltar. For companies in the cryptocurrency industry, the corporate tax rate is 12,5%.

Under the Social Security Act 2021, all cryptocurrency companies registered in Gibraltar are required to make weekly social security contributions regardless of the location of their employees, as long as they are registered with the Employment Service. Contributions range from £28 to £50 per week ($37 to $66).

The social security exemption applies in the following cases:

• the employee is also working elsewhere in Gibraltar and their contributions are fully covered by the other employer.
• the employee holds a valid A1 certificate issued by another country in the European Economic Area where their contributions are paid.
• for start-ups with up to 20 employees and small companies with up to 10 employees, there is a credit of £100 (approximately $131) per employee in the first year towards social security.

Stamp duty applies to the transfer or sale of real estate situated in Gibraltar or shares in a company that owns real estate in Gibraltar and is based on the market value of the real estate. Stamp duty rates vary depending on the value of the property.

Gibraltar currently has only one international Double Taxation Agreement signed with the UK. However, companies can take advantage of relief on foreign tax that has already been paid. A Gibraltar resident who receives income subject to tax in Gibraltar and derived from another jurisdiction where tax has already been paid is entitled to a unilateral exemption in Gibraltar from taxation of that income. The amount of the exemption is equal to the tax already paid or Gibraltar tax (the lower value is chosen).

It is important to note that tax legislation is subject to change and it is recommended that you seek advice from a tax professional to obtain up-to-date information on the applicable tax rates and rules in Gibraltar.