The Guernsey Financial Services Commission has confirmed its intentions to pursue the tokenisation of assets, a digitisation process to make assets more accessible, which analysts say could see its market capitalisation reach around $2 trillion by the end of the decade.
It carried out a consultation and has now published supportive feedback for the island’s existing technology-neutral framework to support digital finance.
The commission said that it would publish new guidance supporting the tokenisation of investments and other assets, permitting the use of public blockchains for fund tokenisation, and clarifying the treatment of tokenised securities; removing certain rules and reporting obligations; and offering greater regulatory clarity.
‘The policies set out both simplify our regime and make clear how the Bailiwick provides an attractive regime for innovative digital business,’ said GFSC director-general William Mason.
The commission said it would now work with the States to look to simplify and clarify parts of the legal and regulatory framework for digital finance businesses.
Its changes are intended to simplify licensing and enable existing investment and insurance licensees to carry out certain virtual asset activity under clear conditions, without the need for additional licences.
‘Guernsey is well placed to support responsible digital finance because it combines a flexible legal framework, strong professional expertise and a reputation for proportionate, effective regulation,’ said Gillian Browning, deputy director-general (policy and supervision).
‘This consultation has helped us identify significant practical steps which can give firms greater clarity while maintaining the standards expected of a trusted international finance centre.
'By doing so we are seeking to create the conditions in which well-governed innovation can take place safely and sustainably.’
Local lawyer Liam Murphy, from Ogier, said that the attraction of a tokenised funds regime was clear for the sponsors of investment funds.
‘Tokenisation has the potential to improve operational efficiency, enhance transparency and support new models of investor access and transferability,’ he said.
‘The regulatory and legal infrastructure to support commercially effective tokenisation of funds in Guernsey is already largely in place. We are confident that this initiative will deliver further regulatory clarity for the market and build on the positive direction of travel for digital finance in Guernsey.’
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