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“Blockchain Rock”: Gibraltar’s pitch to create a crypto stock exchange

By Matt Redley
27 January 2022

By Matt Redley

Surrounded by traditional British pubs, a Debenhams and extraordinary cliffs that fall into the ocean, you could be forgiven for thinking you were in a southern coastal town in England. Set against these features, Gibraltar, informally known as “The Rock”, is positioning itself as the location of the world’s first crypto stock exchange.

Gibraltar is hoping that a new stock exchange will attract a swarm of crypto millionaires who wish to avoid substantial taxes. Regulators are currently reviewing a proposal from British entrepreneur and financier, Richard O’Dell, founder of blockchain firm Valereum. If successful, this proposal would mean that O’Dell’s firm would buy an 80% stake in the Gibraltar Stock Exchange, with the aim of creating an integrated exchange in which cryptocurrency is used to trade conventional stocks and financial products, rather than fiat, or government-issued currency. This would make the British overseas territory the first stock exchange of its kind in the world.

Given that the territory is made up of just 33,000 people, and that the financial sector, makes up around €2.4bn of its economy, it would be a bolshy move to position Gibraltar as a global cryptocurrency hub. Many see Gibraltar’s move to re-style itself as a global cryptocurrency hub, follow its previous reputation as a tax haven. To this end, Gibraltar has approved a regulatory framework for crypto businesses that want to operate in the territory.

If Valereum is successful in acquiring the Gibraltar Stock Exchange, this future iteration of the exchange will operate as a typical stock exchange. However, the sole exception will be that trades can be paid for in cryptocurrencies, rather than fiat. Notably, those using the exchange will be able to exchange cryptocurrencies for stocks, which will be held in a trust company held by the exchange. These stocks can be used as collateral for other financial activities, such as securing a bank loan.

The benefit of being able to trade stocks in this way, Patrick Lyle Young, Valereum’s executive director says, is that users can avoid tax that they would otherwise incur. He notes that Bitcoin users want to avoid selling due to the significant capital gains tax bill. Under this proposed stock exchange, access to the stock in a trust company would enable users to provide their stock as collateral for a mortgage, thus avoiding charges from capital gains tax.

With Bermuda, Malta and Gibraltar all vying for a greater piece of the blockchain pie, regulators will be keeping a keen eye on experiments such as this.