Feedback Paper - Growth with Digital Finance (July 2026)

Summary

This is the GFSC's feedback paper responding to its December 2025 consultation 'Supporting Growth with Digital Finance'. It confirms which proposals the Commission is proceeding with, sets out revised Lending, Credit and Finance (LCF) Rules and Guidance (including a marked-up and clean version of Part 10 VASP Rules), and announces related guidance and future work on stablecoins, tokenisation and financial crime technology.

• VASP licensing scope: The Commission will work with the States of Guernsey to amend the LCF Law so that a Part III VASP licence is only required when virtual asset services are provided 'for and on behalf of another natural or legal person', removing individuals trading on their own account from licensing.
• Dual licensing removed: Rule 10.1(1), which required existing LCF/other licensees carrying out VASP activities to also hold a separate VASP licence, will be deleted, reducing dual-licensing burden.
• Retail customers permitted: Rule 10.2(1), restricting VASP licensees to wholesale and institutional customers only, will be deleted, allowing licensed firms to offer digital finance services to retail customers; firms doing so must notify the Commission.
• Environmental reporting removed: Rule 10.3, the VASP-specific environmental/sustainability declaration and return, will be deleted; firms may still report under ISSB standards voluntarily.
• Guidance clarified/deleted: Unhelpful guidance on the definition of virtual assets (digital representations of fiat currency, securities and derivatives) will be removed, and a new Guidance Note on Tokenisation of Investments and Other Assets has been published alongside this paper.
• Custody rules retained: New Rule 10.4 sets out detailed safekeeping obligations for Part III VASP Licensees holding customer virtual assets, covering safe custody, record-keeping, segregation, consent for use or lending of customer assets, and collateral requirements.
• Sandbox licensing approach: New VASP licences will generally be granted for a limited initial duration and may carry conditions (restrictions on business volume/type, enhanced reporting, additional capital/liquidity requirements) before renewal is considered.
• Forthcoming work: The Commission is progressing a proportionate stablecoin regulatory framework, with feedback and rules planned for Autumn 2026, and has already updated AML/CFT/CPF Handbook provisions (May 2026) to support technology use in financial crime compliance.

Overall, existing conduct, AML/CFT and Principles of Conduct of Finance Business requirements continue to apply to all licensees, including those newly permitted to serve retail customers; no additional retail-specific conduct rules are being introduced at this time.

Key obligations

• Part III VASP Licensees offering, providing or conducting virtual asset business directly with retail customers must notify the Commission.
• A Part III VASP Licensee with custody of a customer's virtual assets must keep safe (or arrange safekeeping by an eligible custodian) of documents of title, cryptographic keys or other means of control over those assets.
• A Part III VASP Licensee must ensure virtual assets bought or held for a customer are properly recorded in the customer's name (or an eligible custodian/nominee's name with unique account designation).
• A Part III VASP Licensee must keep customer entitlements to virtual assets identifiable from its own beneficial holdings and from other customers' holdings.
• A Part III VASP Licensee must not use a customer's virtual assets for its own account without the customer's explicit prior written consent.
• A Part III VASP Licensee holding customer virtual assets via its own nominee must accept responsibility for that nominee's acts or omissions.
• A Part III VASP Licensee must not lend or arrange lending of a customer's virtual assets to a third party unless specific written consent, documented terms, adequate collateral and income pass-through conditions are met.
• Licensees dealing with retail customers must take steps commensurate with the increased protection owed to such customers and apply the Principles of Conduct of Finance Business.

Applies to

Virtual Asset Service Providers (VASPs), Lending, Credit and Finance (LCF) Law licensees, funds with crypto asset exposure, insurance firms, banks, custodians

Deadlines

• Autumn 2026: Commission plans to issue stablecoin feedback and rules.