Guernsey opens digital finance services to retail customers in major regulatory shift
- Guernsey Financial Services Commission removes retail customer restrictions, allowing licensed firms to offer digital asset services to retail investors for the first time
- Dual licensing requirement eliminated for existing PoI and Insurance licensees, significantly reducing regulatory burden for firms expanding into virtual assets
- Collective investment schemes permitted to use public blockchains for unitholder registers, effective immediately, reversing previous private blockchain requirement
- Insurance firms can accept premiums and pay claims in stablecoins or cryptocurrency without VASP licence, subject to AML safeguards
- Banking capital treatment aligned with Basel Committee framework, with soundly backed stablecoins potentially qualifying as high quality liquid assets
Key terms
The Guernsey Financial Services Commission has announced sweeping reforms to its digital finance framework that will allow licensed firms to offer cryptocurrency and digital asset services to retail customers for the first time.
The changes, detailed in a feedback paper published following consultation, mark a policy reversal and aim to position the Bailiwick as a more competitive jurisdiction for digital asset businesses while maintaining regulatory standards.
The Commission is removing Rule 10.2(1), which previously restricted Virtual Asset Service Provider licensees to serving only institutional and wholesale counterparties. This means firms licensed and regulated by the Commission will be able to offer digital finance services to retail customers.
"The Commission takes the view that this is an important area of growth and it is important that Guernsey firms and investors have access to this broader market," the feedback paper states.
The Commission acknowledged that "complexity and risk in investments is not unique to digital finance and virtual assets." Firms offering retail services must notify the Commission and apply resources commensurate with the increased level of protection owed to such customers.
The changes follow the Commission's December 2025 consultation on "Supporting Growth with Digital Finance," which attracted strong stakeholder engagement with overall positive and constructive feedback.
In another reform, the Commission is eliminating dual licensing requirements for existing financial services firms. Licensees under Protection of Investors and Insurance laws will no longer require an additional VASP licence to trade, hold, invest in, or custody virtual assets.
"This is a significant change, decreasing the regulatory burden and enabling existing licensees to expand their services more easily," the Commission stated.
The Commission will work with the States of Guernsey to amend the Lending, Credit and Finance (Bailiwick of Guernsey) Law, 2022 to clarify that VASP licensing applies only when activities are conducted "for and on behalf of another natural or legal person." This removes the requirement for individuals trading cryptoassets on their own behalf to be licensed.
Rather than amending the law directly for all changes, the Commission plans to issue a consolidated Section 40 (VASP) Notice that will disapply VASP licensing requirements for Protection of Investors licensees acting as custodians of digital assets, PoI and Insurance licensees holding, transferring or investing in virtual assets in the course of their licensed activities, and fiduciaries and administrators providing services to VASPs.
In a reversal of previous policy, the Commission is now permitting collective investment schemes to use public blockchains to maintain registers of unitholders, effective immediately. This overturns the previous requirement for private blockchain infrastructure only.
The Commission has rescinded its May 2024 Policy Statement on Fund Tokenisation and issued a new comprehensive Guidance Note on Tokenisation covering both funds and securities.
The guidance confirms that tokenised securities meeting the definition of Category 2 Controlled Investments fall within the scope of the Protection of Investors Law. No amendments to the PoI Law or Prospectus Rules are required, as the existing framework is "sufficiently broad and technology-neutral to accommodate tokenised securities and tokenised funds."
The Guidance Note on Tokenisation confirms that the Companies (Guernsey) Law, 2008 and Limited Partnerships (Guernsey) Law, 1995 permit registers to be maintained in electronic form on blockchain, meaning a parallel off-chain register is not required under Guernsey law.
The insurance sector receives explicit support for using smart contracts to effect insurance contracts, particularly for parametric insurance and reinsurance. This does not constitute VASP activity.
Insurance firms may accept premiums and pay claims in stablecoins or cryptocurrency without requiring a VASP licence, subject to appropriate anti-money laundering, counter-financing of terrorism and counter-proliferation financing safeguards. Policy limits may be expressed in cryptocurrency.
The Commission confirmed that tokenised insurance linked securities issued by Special Purpose Insurers do not constitute virtual assets for VASP licensing purposes.
For banking capital treatment, the Commission has adopted an approach aligned with the Basel Committee on Banking Supervision framework for cryptoasset exposures.
Soundly backed stablecoins issued by Guernsey-regulated issuers and those complying with the US GENIUS Act will be treated in line with underlying reserve assets, potentially qualifying as "Group 1a" assets. Where underlying assets meet criteria, they may be considered High Quality Liquid Assets.
Banks may hold appropriately regulated stablecoins but must seek Commission approval for holdings exceeding 10 per cent of tier 1 capital. Other cryptoassets will be risk-weighted in line with the BCBS approach, with 1,250 per cent risk weighting for exposures exceeding 1 per cent of tier 1 capital.
Banks must disclose holdings of digital assets, with bank reporting forms to be amended accordingly.
In May 2026, the Commission published updated sections of the Handbook on Countering Financial Crime to support technology use in compliance.
The Commission recognises smart contracts can enhance anti-money laundering, counter-financing of terrorism and counter-proliferation financing controls through automated sanctions screening and blocking, travel rule compliance automation, gating mechanisms restricting token transfers to verified wallet addresses, and automated triggers for enhanced due diligence.
The Commission emphasised that whilst technology can enhance efficiency, it "cannot entirely replace human judgement" and firms must maintain appropriate oversight.
The Commission noted broad support for centralised customer due diligence solutions enabling sharing of customer information across firms, though stated it does not have a mandate to oversee such a utility but would support Bailiwick initiatives.
The Commission has deleted Rule 10.3 requiring separate environmental and sustainability declarations for VASPs, bringing practice in line with other regulatory laws. The Commission noted this rule was "drafted in a Bitcoin-centric era with more modern blockchain technologies now being more energy efficient."
Guidance stating that "digital representations of fiat currency and general securities or derivatives" includes bank accounts and security registers has been deleted, as it had caused unintended regulatory consequences.
The Commission stated that feedback and rules for stablecoins "will follow during Autumn 2026." There was "strong industry support for a clear and credible approach in this area."
For insurance solvency purposes, the Commission indicated it is "open to the inclusion of suitable stablecoins" - those "properly reserved, always backed by appropriate reserve assets, redeemable on demand and suitably liquid."
The Commission is introducing targeted reporting requirements. Form 152 (Investment Vehicles Return) now includes questions on whether funds issue tokenised shares. New online application questions for fund applications have been added.
Licensed fiduciaries must report annually on tokenisation-related activity they service. Fiduciaries undertaking self-custody or servicing structures holding digital assets face targeted reporting. Banks must report digital assets in amended BSL2 forms. Protection of Investors and Insurance licensees benefiting from VASP licensing disapplications must notify the Commission before commencing activities.
The Commission stated it is "supportive in principle of permitting payment of annual regulatory fees in a Guernsey-regulated stablecoin, subject to appropriate safeguards and adjustment for conversion costs."
Most changes take effect October 1, 2026, except for public blockchain permission for funds, which is effective immediately, the stablecoin framework, due in Autumn 2026, and the Section 40 (VASP) Notice, subject to further consultation closing August 31, 2026.
The feedback paper consistently referenced the importance of international alignment, particularly with Financial Action Task Force Standards and Recommendations, the Basel Committee on Banking Supervision framework, the US GENIUS Act for stablecoins, MONEYVAL assessment outcomes, and International Sustainability Standards Board reporting standards.
The Commission emphasised Guernsey's competitive advantages, including its technology-neutral legal framework, proportionate regulation, robust anti-money laundering regime, strong reputation as a trusted international financial centre, and positive MONEYVAL assessment outcomes.
"Guernsey's existing legal and regulatory framework is already well placed to support innovation in digital finance. In particular, the Bailiwick's technology-neutral approach, combined with proportionate regulation and a robust anti-financial crime regime, was seen as a key strength," the Commission stated.
Respondents highlighted that Guernsey is "a reputable jurisdiction in which to pursue innovative ideas in the digital finance space."
"The measures outlined are designed to ensure that the Bailiwick continues to improve as an attractive and competitive location for digital finance," the Commission added.
The Commission maintains its Innovation Sandbox + Concierge Service, enhanced following consultation feedback, for firms considering innovative business models. A Digital Forum will continue with roundtables on emerging technologies, regulatory priorities and strategic opportunities.
The Commission stated it "remains open to further engagement as appropriate, including in emerging areas such as tokenised deposits and vaults."
Q&A
Q: What is the most significant change in the new digital finance framework?
A: The Commission is removing the restriction that limited VASP licensees to serving only institutional and wholesale counterparties. This means licensed firms will now be able to offer digital finance services to retail customers for the first time.
Q: When do the new rules take effect?
A: Most changes take effect on October 1, 2026. However, permission for funds to use public blockchains is effective immediately, the stablecoin framework will follow in Autumn 2026, and the Section 40 (VASP) Notice is subject to consultation closing August 31, 2026.
Q: How does the dual licensing change affect existing financial services firms?
A: Existing licensees under Protection of Investors and Insurance laws will no longer require an additional VASP licence to trade, hold, invest in, or custody virtual assets. The Commission described this as a significant change that decreases regulatory burden and enables existing licensees to expand their services more easily.
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