Does Malta live up to its reputation as a cryptocurrency hub?
Despite the major wave of recent governmental approvals and licensing in the cryptocurrency industry, Malta is about to become the world’s first official country that legalized crypto and blockchain on all governmental levels, with the new bills coming into effect on November 1st, on the eve of the Malta Blockchain Summit. Does Malta live up to its reputation as a cryptocurrency hub? Let’s dive in and find out.
Cheat sheet of the three backbone bills coming into effect November 1, 2018
Malta Digital Innovation Authority Act (MDIA Act) focuses on internal governance arrangements, outlining the duties and responsibilities of the Authority to certify DLT (Distributed Ledger Technology) platforms.
Innovative Technology Arrangement and Services Act (ITAS Act) deals with DLT arrangements and certifications of DLT platforms, introducing a set of rules related to setting up of exchanges and other companies operating in the cryptocurrency industry.
Virtual Financial Assets Act (VFA Act) establishes regulations governing ICOs, cryptocurrency exchanges, wallet providers and so on.
What’s in it for crypto and blockchain?
Releasing the three aforementioned bills puts Malta on the front lines of the European cryptomarket. While other governments are still adopting rules and guidelines, Malta has already resolved the major issue each cryptocurrency company has been facing: operating under a ‘legal shadow.’ Establishment of the well-defined operational guidelines coming from the government directly will certainly ease the operational headaches that each cryptocurrency company is facing. Additionally, it would also boost the growth of the crypto market in general, as traditional financial industry investors would feel more comfortable putting their money in.
Another attractive spot where Malta shines is the tax rate. Malta’s national tax law allows international companies to pay a rate of as little as 5 percent.
What’s in it for Malta?
Put simply, money. A tiny island nation doesn’t have a lot to offer its citizens, besides jobs. With the fully legalized cryptocurrency and blockchain on the governmental level, the opportunities of the job growth are enormous. Several major cryptocurrency companies, including Binance, the world’s leading cryptocurrency exchange, have announced that they’re setting up shops in Malta.
Speaking at the United Nations 73rd General Debate, prime minister of Malta, Joseph Muscat, called cryptocurrencies ‘inevitable future of money,’ also emphasizing the importance of blockchain technology.
“Blockchain makes cryptocurrencies, the inevitable future of money, more transparent, since it helps filter good business from bad business,” he said. “But these distributed ledger technologies can do so much more.”
Additionally to major established crypto companies, the Maltese government signed partnership agreements with a range of emerging exchanges, which would ensure the country’s crypto market will stay competitive.
Additionally to a drastic increase in revenue due to more new businesses coming in, Malta will take a leading role in innovation on the European level. In the nearest future, the tiny island nation might very well become a trendsetter and a go-to resource in a direction for other governments to follow.
Is there a downside?
First, the Virtual Financial Assets (VFA) Act requires a mandatory test all cryptocurrency and ICO agents must pass for them to be able to practice. The number of those who failed the test is indeed alarming. According to Times of Malta, despite the last-minute changes the Maltese authorities made to boost the pass rate, only 39% of the applicants were able to do it. The exam was set by the Malta Financial Services Authority (MFSA) and administered by the Institute of Financial Services Practitioners.
Second, the Malta Financial Services Authority will require all VFA agents to apply for a license once in twelve months. The Maltese authorities emphasized that not only traders would be considered as VFA agents, but also companies looking to provide other financial asset services, such as portfolio management or investment advice.
While not necessarily being a downside, a full legalization of blockchain and crypto on a governmental level will inevitably bring a set of higher rules and standards controlled by the government. And while it might cost a slight inconvenience to some market players, it will also boost crypto market in the long run, experts say. Setting higher professional standards will attract more investment capital from both traditional investors and users, making crypto and blockchain more and more involved in our everyday lives — in Malta and worldwide.