In a recent feedback paper published by the Guernsey Financial Services Commission (GFSC) on tokenisation of assets regulations, the organisation has hailed its support for re/insurers using tokenised ILS contracts, in a move that is expected to drive further innovation within the digital finance space.
According to GFSC, the consultation feedback confirmed that Guernsey’s existing technology-neutral framework is well-suited for digital finance. The paper proposes targeted refinements to reduce complexity, clear routes to market, and ensure well-governed innovation can scale safely.
Following overwhelmingly positive feedback, the Commission is moving forward with a series of actions. These include: issuing new guidance to support the tokenisation of investments and other assets; permitting the use of public blockchains for fund tokenisation, and providing regulatory clarity, such as how tokenised insurance-linked securities (ILS) do not require VASP (virtual asset service provider) licensing.
The Commission also explained that going forward it will work with the States of Guernsey to simplify and clarify parts of the legal and regulatory framework for digital finance businesses. The proposed changes aim to simplify the licensing process, allowing current investment and insurance license holders to engage in specific virtual asset activities without requiring an additional VASP licence.
Most relevant to Artemis’ readers is the clarification around tokenised ILS. As per GFSC, respondents from the paper agreed that issuing tokenised ILS should not require a VASP (virtual asset service provider) licence, as well as where the Commission affirmed that re/insurers can deploy these structures without navigating extra licensing hurdles.
“Respondents agreed that issuing tokenised ILS should not require a VASP licence and welcomed the Commission’s proposal to issue guidance to this effect. A number of suggestions were made by respondents regarding methods by which the Commission could help support the use of digital technology used by SPIs. This included requesting clarification of the regulatory treatment of “smart contract” based parametric trigger mechanisms within ILS structures, and amending the virtual assets definition to specifically exclude digital representations of ILS,” the paper reads.
To formalise this stance, the Commission is issuing FAQs confirming that tokenised ILS do not constitute virtual assets for VASP licensing purposes.
Addressing feedback regarding “smart contracts” for parametric triggers, the organisation noted that these arrangements fall within existing insurance regulations, serving effectively as an automation of existing contract and trigger mechanisms.
“There is nothing within the existing rules to bar such arrangements and no additional permissions or rule changes would be required. These arrangements would not fall within scope of the LCF or VASP rules,” the paper added.
Deputy Director General (Policy and Supervision) Gillian Browning, commented: “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.
“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.”
Director General William Mason, said: “We would like to thank everyone in industry, the technology firms and the professional services firms whose input has informed and strengthened the digital finance approaches we are launching today. The policies set out both simplify our regime and make clear how the Bailiwick provides an attractive regime for innovative digital business.”
Meanwhile, there have also been similar shifts within Bermuda, as the island’s regulatory space adapts to tokenisation and cryptocurrency integration within its ILS and re/insurance sectors.
In late 2025, the Bermuda Monetary Authority (BMA), highlighted how the convergence of tokenisation with Bermuda’s traditional insurance-linked securities (ILS) sector presents opportunities to enhance liquidity, reduce transaction costs and expand access to insurance risk transfer across the British overseas territory.
The BMA also recently outlined that Bermuda’s ILS sector sits well placed to benefit from stablecoins, as this form of cryptocurrency continues to move into a key system of institutional finance.
