The Key To Creating A Global Liquidity Pool |Digital Security Frontier Vision #9
Welcome to Digital Security Frontier Vision: The Voice of the Core Builders from Global Digital Security Industry #9 .
Nick Cowan is Managing Director and Founder of the Gibraltar Stock Exchange Group Limited. Nick has over 30 years of experience in capital markets, including being the head of Equities at ING Barings, managing up to 2,500 employees in 43 countries, including 40 stock exchange memberships.
We are pleased to welcome Nick Cowan from Gibraltar Stock Exchange Group. In this interview ,we will learn and understand more about the importance of governance in the STO ecosystem, the biggest challenge with STO and how to solve it.
Enjoy the Interview!
1, When ICOs came into being，Gibraltar introduced positive policy, why is Gibraltar so passionate about this? What is the development history of the traditional financial industry in Gibraltar in recent years?
“Gibraltar’s businesses, regulators, and industry groups have collaborated to spearhead Gibraltar’s ascent as the first jurisdiction in the world to introduce a purpose built DLT regulatory framework. IDC (International Data Corporation) forecasts that global spending on blockchain solutions alone will reach $9.7 billion USD by 2021, and Gibraltar wants to play a leading role in the evolution of this transformative sector.”
2. What is Gibraltar’s attitude towards the blockchain industry at present? What is their attitude towards STO industries?
“Gibraltar has taken a very proactive approach to facilitating blockchain innovation on home soil, emerging as a global licensing trailblazer with respect to introducing DLT regulation. The jurisdiction continues to welcome quality blockchain projects that want to avail of the supportive business environment, and tap into the thriving blockchain community that has formed here. So far, over 40 companies have applied to the Gibraltar Financial Services Commission (GFSC) for a DLT licence.
Separately, we think of STO’s as digital securities, which blend blockchain innovation with the familiarity, regulatory scrutiny and security of traditional finance. This segment of the capital markets is rapidly evolving and, again, Gibraltar is seeking to be at the forefront of this development.”
3. What licenses does GSX and GBX have? What is the difference between these licenses?
“The Gibraltar Stock Exchange (GSX) operates two exchanges: the Main Market — a European Union (EU) regulated stock exchange, and the Global Market — a multilateral trading facility. GSX is regulated by the Gibraltar Financial Services Commission (GFSC). As a Stock Exchange based in the European Union, the GSX currently falls under the European Securities Market Association, and a number of regulations such as MiFID II, the Prospectus Directive, the Market Abuse Directive, and the Transparency Directive.
“The Gibraltar Blockchain Exchange (GBX) received its full Distributed Ledger Technology (DLT) licence from the Gibraltar Financial Services Commission (GFSC) in November 2018. The DLT licence enables the GBX to store and transmit value belonging to others using blockchain technology, while operating as a regulated blockchain exchange.”
In summary, within the GSX Group, our GSX exchanges are licensed and regulated for traditional securities, and our GBX exchange is licensed and regulated for tokens that are not deemed securities.
4. What is the listing process for issuers coming to GSX?
The GSX offers a comprehensive, cost-effective method for issuers to list both traditional and tokenised securities on our regulated exchanges — the Main Market and the Global Market
In terms of process, issuers must first appoint a Member Firm. They are the cornerstones of the GSX, guiding issuers to market in accordance with our Listing Codes, drafting the offering documents, generally advising and supporting issuers throughout the listing process. Member Firms are the point of contact between clients and the exchange, making for an efficient and clear communication pathway.
Admission to listing is achieved by approval of offering documents from the Listing Authority
It is important to stress that whether traditional or tokenised digital securities, the listing process will be the same
Equally, as the GSX moves into the digital securities space, innovating and transforming capital markets through blockchain technology and our STACS Network, the knowledge and experience as an EU regulated stock exchange will prove a key factor in the success of greater adoption of tokenised securities.
5. What do you think are the advantages of GBX?
“Within the entire GSX Group, including the GBX, we pride ourselves on incorporating some of the most rigorous security measures in the industry. Consumer protection is our number one priority, and we are one of the few exchanges in the world to be insured against cybercrime. Additionally, as a regulated exchange, we have adopted a rigorous vetting process for token sales and secondary utility tokens, to ensure issuer transparency and treating customers fairly, in line with the nine principles underpinning the DLT regulatory framework developed by the Gibraltar Financial Services Commission (GFSC).
Our aim for GBX since its inception in 2017, has always been to take many of the good practices of operating a regulated securities exchange — the key concepts of consumer protection, issuer eligibility, disclosures, reporting and preventing market abuse — and apply them to crypto. We were one of the first in the world to do so.
6. What is the current status of global cryptocurrency regulation? What do you think about the importance of governance in the STO ecosystem?
A lack of EU-wide crypto regulation is a deterrent to blockchain innovation and will continue to hinder adoption of the technology by mainstream financial service providers going forward. This uncertainty when it comes to regulation has been identified as a significant barrier to mainstream adoption of digital assets and blockchain technology. However, I believe strongly that 2019 will be the year of regulation. Smaller jurisdictions in the EU are taking a lead, with Gibraltar having already introduced a best practice regulatory framework for blockchain businesses.”
For STOs, it is important to realise that governance is already enshrined in securities legislation. We are not reinventing the wheel here but, through digital technology, making it spin faster and more efficiently! The challenge is to get global regulators, exchanges, and the capital markets in general comfortable with the fact that STOs are not only securities, but “smart securities.”
7. What will be the main center for STO offerings in the world, Asia, US, or Europe?
“It depends on which area develops the clearest, most reputable, and transparent regulation on STOs. However, the value of token sales in Europe during 2018 was around $4.1 billion, surpassing the $2.6 billion raised in the US and $2.3 billion in Asia. With this in mind, Europe can provide fertile ground for STOs.”
8. What do you think is the biggest challenge with STO? Now many people think that STO’s problem is shortage of liquidity, from your perspective, how will you solve this?
In one word — interoperability.
To explain, as I mentioned earlier, the overarching challenge will be gaining global regulatory acceptance together with ‘buy-in” from traditional capital markets. To achieve this what is needed is a sustained global collaborative effort, sand the sharing of common high regulatory standards and protocols that crosses and links boundaries. And while It’s great to see so many security token platforms being built, the downside- and danger- is that without interoperability, and a general understanding and recognition that operating an international securities markets to link exchanges, issuers and investors together is the key to creating a global liquidity pool, we may be left with new legacy structures built over existing legacy systems. That to me doesn’t make sense.
9. How do you see the entire global STO market evolving in 2019? In 2020, how do you think the industry will develop and how large will the industry be?
“Looking ahead to 2019 and 2020, I envision the introduction of legislation around STOs to continue to take place at a gradual, methodical pace. The token sale market is a billion dollar industry and we believe that tokenised securities can be a multi-trillion dollar business. A report by the World Economic Forum highlighted that 10% of GDP is likely to be stored on the blockchain by 2027.”
10. You said “the GSX Group aims to bring blockchain and digital assets to the mainstream”. How is GSX going to do this?
“Tied to our goal of accelerating the mainstream adoption levels of blockchain and digital assets, one of our core ambitions since day one has been to provide a high-powered, trusted, and secure trading experience for users. This ambition is realised each day as we work with our community to build the GSX Group fintech ecosystem, increasing trust, confidence and our reputation our ambition is to bridge the gap between the emerging blockchain industry and traditional finance, using blockchain technology to transform the capital markets. We can achieve our goals of greater adoption and recognition, for example GBX receiving a full DLT licence from the GFSC was a landmark moment for us. Since then, we have embarked on an extensive campaign of token additions to our GBX Digital Asset Exchange (DAX), a phase of activity that will continue in the months ahead.”
11. What is GSX’s next plan?
“GSX Group is aiming to be the intersect between global traditional finance and crypto finance. The grand vision of the Securities Trading Asset Classification Settlement (STACS) protocol, which we have developed as part of the wider Hashstacs group, is to set the gold standard in supporting the issuance, trading, clearing, and settling of digital securities while providing issuers access to a global pool of capital and liquidity. We want to establish a venue where regulated incumbents such as investment banks, exchanges or broker-dealers can capitalise on the potential of tokenised securities including STOs.”
Thank you for the interview!
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