This article was originally published here.
Despite its tiny footprint on the global map, Malta is renowned globally for its innovativeness in the blockchain, Cryptocurrencies and distributed ledger technology industry. In early July, the Maltese parliament created laws governing the blockchain and digital currencies sector. According to the country’s minister of finance, Silvio Schembri, the passing of the laws mentioned above made Malta the first nation to have a clarified legal stance on blockchain operations. Silvio also revealed that the new regulatory framework is all-encompassing, transcending beyond the financial use cases of blockchain technology.
In a recent interview with Forbes, Schembri elaborated further on the recently passed laws, and how Malta intends to treat leading crypto exchanges like Binance when they start operations in the country.
Why is Malta referred to as “The World’s Blockchain Island?”
Schembri believes that Malta earned this title due to its distinctive approach on blockchain technology. While most countries are interested in the short-term, Malta is concerned with the long-term potential of this discovery. Silvio compared this approach to the way different people look at an ICO’s whitepaper. Most investors overlook the technical suspects of the projects, a factor that Malta pays keen interest on.
Additionally, Maltese laws conform to the standards set by the EU. In this regard, the government does not compromise whatsoever on market integrity, consumer protection and industry protection. Furthermore, the recently passed laws are based on these guidelines, with an intention of clarifying the legal stance of the administration on an industry that was hitherto unregulated. For this reason, blockchain startups find the Maltese market appealing.
Requirements for establishing ICOs and Cryptocurrency Exchange
The Maltese government is open to the establishment of blockchain projects in the country. However, such institutions are required to conform to the regulations as stipulated in the recently passed bills. ICOs are given a grace period of six months to comply with these rules, while crypto exchanges are given a year. The new law is scheduled to take effect in October, coinciding with the DELTA blockchain summit.
Advantages of Operating in Malta (from a blockchain company perspective)
The most significant advantage of trading in Malta is the willingness of the government to implement the proposals made by blockchain startups. Besides, English is a common dialect in the country, thereby eliminating the possibility of language barriers. The Maltese citizens are also equipped with exemplary skills in the financial services industry, the leading application area for blockchain projects.
Furthermore, the tax regime deployed in Malta is favorable to blockchain companies. The location of the island is also ideal, as it is found near the European and African continents.
Is Regulation Necessary in the Crypto Space?
Naturally, Silvio is inclined to support the enforcement of regulations because he works for the government. Nonetheless, he supported his stance by indicating that many operators are actively seeking the enactment of regulations. Schembri noted that the dynamism of the industry provides a challenge in the drafting of these laws, as the evolution is highly to make the laws obsolete within the next few years. Because of this the Maltese government has created a team, the Malta Digital Innovation authority, which continuously assesses the technology sphere and comes up with suitable legal recommendations.
Fraud and Low Success Rate of ICOs
One of the reasons behind the creation of the cryptocurrency regulations is the prevalence of fraud in the blockchain sector. Silvio, however, is against the banning of digital currencies on the basis that they are used to finance illicit activities such as laundering, drug and human trafficking and terrorisms. In defense of cryptocurrencies, Schembri argued that fiat money is also used for illegal transactions and is untraceable, unlike digital currencies.
As a countermeasure, Silvio suggested the creation of laws that will stop illicit activities without inhibiting innovation in the blockchain sector. He further revealed that Malta is talking to other European countries to lift the bans imposed on virtual currencies and instead enact regulations on the blockchain sector.
Lastly, Silvio reiterated that Malta is the ideal location for the establishment of blockchain startups in the world. Besides believing in the technology, the government also has a friendly tax regime and favorable regulations.