GFSC response to Consultation on Supporting Growth with Digital Finance: key takeaways

The Guernsey Financial Services Commission has issued its response to the Consultation on Supporting Growth with Digital Finance, providing greater clarity on a number of issues including VASP licensing, fund tokenisation on public blockchains, custody arrangements and the use of digital assets within existing regulated activities.  

Published on Friday 24 July, the response ( the Feedback Paper) summarises the industry feedback received and sets out the GFSC's position on each item in the consultation: what it has confirmed; what it has amended; and what it has deferred.  

This article summarises the key takeaways.  

VASP licensing perimeter: FATF alignment confirmed 

The GFSC will proceed with revisions to the Lending, Credit and Finance (Bailiwick of Guernsey) Law, 2022 (the LCF Law) to narrow the Virtual Asset Service Provider (VASP) activity perimeter.  

It is confirmed that a VASP licence will be required only for services carried out "for or on behalf of another natural or legal person," removing own-account and proprietary activity from regulation. Further, regulated firms will be able to offer digital finance services to retail customers (subject to certain requirements) which will be effected by making changes to Part 10 of the Lending, Credit and Finance Rules and Guidance, 2023 (the LCF Rules). 

Stablecoins: framework deferred 

The GFSC has deferred its substantive response regarding rules for stablecoins, which will be delivered "during Autum 2026". The GFSC notes strong industry support for a clear and credible stablecoin framework and confirms it is progressing plans to develop a proportionate regime. Watch this space.

Fund tokenisation: public blockchain permission confirmed 

The GFSC has revised its position to permit fund tokenisation on public blockchains, effective immediately subject to appropriate controls. A Guidance Note on Tokenisation has been issued, which includes a non-exhaustive summary of benefits and risks.

Tokenised securities: existing framework confirmed

The GFSC concluded that no legislative changes to the Protection of Investors (Bailiwick of Guernsey) Law, 2020 (POI Law) or the Prospectus Rules and Guidance, 2025 (the Prospectus Rules) are necessary. Tokens that convey rights consistent with a "Category 2 Controlled Investment" will be treated as such, and the Guidance Note on Tokenisation sets out how the framework applies. 

Custody: removal of dual licensing confirmed

The GFSC will permit existing licensees to act as custodians of digital assets without a separate VASP licence subject to certain requirements. Existing POI Law licensees can trade, hold, or invest in virtual assets in the course of their licensed activities without additional licensing requirements. Changes are intended to be introduced by a new disapplication notice under Section 40 of the LCF Law (the Revised Section 40 Notice) which will consolidate all disapplications relating to VASP licensing.  

Insurance of ILS: suitability confirmed

The GFSC confirms that distributed ledger technology and smart contracts can be used to effect insurance contracts without triggering a VASP licence requirement and is issuing FAQs to this effect. Insurers, intermediaries, and managers may accept premiums and pay claims in stablecoins or cryptocurrency (and express policy limits in cryptocurrency) without a VASP licence (subject to AML compliance). Insurance licensees will also be included in the Revised Section 40 Notice.

Banking and capital treatment: Basel confirmed 

The GFSC confirms that it intends to maintain alignment with the Basel Committee on Banking Supervision framework in a step we consider to be materially positive for banks operating in the sector. Soundly-backed stablecoins will be treated in line with underlying reserve assets where sufficiently liquid and unencumbered, qualifying for "Group 1a" treatment.

Anti-financial crime technology: no major reform still needed

Following the May 2026 technology amendments to Guernsey's Handbook on Countering Financial Crime (the Handbook), no further reform is currently proposed. On centralised CDD / "portable KYC", while the GFSC does not have a mandate to run a central utility it would support a Bailiwick initiative by shaping regulatory expectations and ensuring Handbook alignment. 

Legal certainty: existing framework confirmed

The GFSC concluded that Guernsey already has a strong legal foundation and that no broader legal or regulatory changes are needed. Our view remains that greater express certainty on the property status of digital assets may be beneficial to the market in the medium term.  

Other feedback: certain items noted 

The GFSC does not currently intend to introduce a specific framework for DAOs or DeFi, though it remains open in principle to emerging areas such as tokenised deposits and vaults.  

What's next?

The timeline for implementing further change is as follows:  

• changes to the LCF Rules are intended to take effect on 1 October 2026 
• comments on the Revised Section 40 Notice proposals are requested by 31 August 2026 by email to dfi@gfsc.gg 
• stablecoin feedback and rules will follow in Autumn 2026 

The GFSC is also working with the States of Guernsey on legislative amendments, introducing targeted reporting requirements, and continuing Digital Forum engagement. The Innovation Sandbox and Concierge remains available for firms with innovative models seeking pre-application dialogue. 

Practical implications and next steps for market participants

The Feedback Paper demonstrates a regulator moving at pace: the consultation closed in March, first responses were delivered in May, with this further fulsome response coming in July. We see a regulator that is engaged, collaborative, and willing to do the legislative work. 

Much is now settled: the VASP perimeter, retail access, fund tokenisation on public chains, tokenised securities guidance, custody dual-licensing removal, insurance / ILS confirmations, and Basel alignment.  

Firms should consider mapping confirmed changes against their licences and business models now:  

• existing licensees should reassess opportunities 
• fund managers and administrators should prepare for public-chain tokenisation, the administrator-as-definitive-register model, and new reporting obligations 
• trustees should review self-custody controls 
• insurers and ILS sponsors should treat tokenised ILS and smart-contract parametric triggers as near-term products 
• banks should model stablecoin capital treatment 

The Revised Section 40 Notice consultation closes on 31 August 2026 and we suggest firms with a view should consider responding.

How Ogier can help 

Ogier's corporate and funds team continues to advise clients on how these and other regulatory requirements will affect their structuring, licensing, and product launches in Guernsey.  

Get in contact if you are considering how to effectively position for the changes ahead. 

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Disclaimer

This client briefing has been prepared for clients and professional associates of Ogier. The information and expressions of opinion which it contains are not intended to be a comprehensive study or to provide legal advice and should not be treated as a substitute for specific advice concerning individual situations.

Regulatory information can be found under Legal Notice