The Gibraltar Stock Exchange will undergo renovations in order to become the world's first integrated exchange.

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Gibraltar, which is known for being a tax haven, is on the verge of becoming a major cryptocurrency hub next year, as the territory prepares for a financial industry overhaul.

The Gibraltar Stock Exchange (GSX) is set to be purchased by Gibraltar-based blockchain firm Valereum, which plans to turn it into the world's first integrated bourse that will list both traditional bonds and top cryptocurrencies like Bitcoin, according to a report published by The Guardian earlier today.

Crypto hub or tax haven

However, a number of roadblocks stand in the way of this British Overseas Territory, one of them being its minuscule regulatory body. Its small size makes this move even more decisive, as it could either see the enclave becoming a global crypto hub or shunned by the international community as a haven for financial crimes.

While Gibraltar has been actively regulating its cryptocurrency sector over the past few years, this latest move comes at a time when it is still struggling to shed off its global image as a tax haven due to the tax benefits it provides to offshore companies. It was only recently taken off its neighboring Spain’s list of non-cooperating nations. This was done to ensure that the territory follows EU-level legislation in terms of tax transparency and works towards fighting financial crimes.

Albert Isola, who is Gibraltar’s minister for digital, financial services, and public utilities highlighted the same by noting that the territory has now overhauled its tax and information sharing policies, and regulating the crypto industry was having a similar effect in rooting out bad actors and protecting investors. He was quoted by The Guardian as saying,

“I don’t understand how there can be any increased risk in Gibraltar when you can go to any other European country today and run exactly the same business without being supervised, without being licensed, and without being regulated.”

Valereum’s Chairman Richard Poulden shared similar views, adding that regulating an exchange that is currently staffed by only three employees will require the strength of technology rather than people. He noted that running anti-money laundering checks on both cryptocurrencies and regular currency would require a similar mechanism, adding,

“Indeed, in some cases, because you can trace back through the blockchain and see exactly where that money has come from, it can actually be substantially easier than trying to find where a block of funds in a bank has come from.”

Major revamp on the way

Regardless of the optimism, overhauling the GSX would require comprehensive regulatory revamping and could prove to be a huge gamble for the tiny territory. The legal acceptance of crypto businesses that unwittingly host money launderers, terrorism funders, fugitives, and other financial criminals who use cryptocurrencies could result in Gibraltar being sanctioned by countries like the United States.

The Financial Action Task Force, the world's money laundering and terrorism financing watchdog, might display similar wrath. The authority's grey-listing may devastate the territory's economy, as member nations would be forced to cut off business connections.

Another unfavourable outcome would be Gibraltar's possible designation as a new crypto haven, where people would flee "to avoid actual regulators."

Over the last three years, fourteen crypto businesses have won regulatory licence in the zone known as "blockchain rock." Furthermore, in order to improve the delivery of public services in the region, its government has opted to integrate blockchain into its administration systems.

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