Malta has long since established a solid foundation for business and industry to flourishin a whole variety of different sectors. A testament to what has been achieved by the open-minded authorities in that regard is evidenced by the hundreds of foreign companies that operate there successfully.
This desire to attract new business and innovate has now resulted in the Maltese authorities turning their attention to the burgeoning world of cryptocurrencies. The main reason that Malta is becoming so attractive to cryptocurrency exchanges is that it is the first country in the world to prioritise the establishment of a definitive regulatory framework for such enterprises.
How it All Began
The ball really and truly got rolling back in October of last year, when the Malta Financial Services Authority, the nation’s financial watchdog, announced that it would be holding a consultation period calling on both the general public and private companies to give their feedback on the regulations in relation to cryptocurrencies that it had proposed, which initially covered collective investment schemes actively investing in cryptocurrencies. The feedback statement in relation to these findings was published in January this year.
One of the major outcomes of this consultation period was the notion that the scope of the regulatory framework had to be widened to include the regulation of virtual currencies themselves, Initial Coin Offerings, cryptocurrency exchanges and the use of blockchain technology.
All of the above will eventually lead to the enactment of a Virtual Currency Actin Malta, as stated by Malta’s Parliamentary Secretary for the Digital Economy, Silvio Schembri. The Maltese authorities’ commitment to becoming the “Blockchain Island” is further evidenced by the creation of the Malta Digital Innovation Authority, which was proposed in a bill presented to the Maltese parliament in Mach this year. The proposed new authority is intended to provide legal clarity for companies operating in cryptocurrencies, or developing technologies in relation to them.
The Cryptocurrency Exchange Catalyst
These efforts did not go unnoticed by Binance, which is the world’s largest cryptocurrency exchange by trading value, announcing on March 23rdthat it would be setting up a base of operations in Malta. This occurred following the company having to cease operations at its Japanese office after failing to receive an operating license from Japan’s Financial Services Agency.
In addition, Binance has also run into problems in Hong Kong, the jurisdiction in which it originated, after it was issued with a warning letterfrom the authorities against trading in ICOs that had the characteristics of securities. Warning letters were in fact issued concurrently to several Hong Kong-based currency exchanges.
As several Asian countries, along with numerous others around the world, appear to be turning their back on cryptocurrencies and cryptocurrency exchanges, Malta is completely undeterred, and is actively welcoming them.
In fact, following the Binance announcement, which garnered plenty of press attention, rumour has it that there are dozens of other cryptocurrency exchanges looking at establishing bases of their own on the island to take advantage of the opportunities offered by what will likely be the very first jurisdiction in the world to regulate cryptocurrencies and cryptocurrency exchanges.
Putting Malta’s Appeal into Context
Such moves are being made in the context of major countries tightening the screws on cryptocurrencies and cryptocurrency exchanges, if not turning their backs on them altogether. China is the most prominent example of the latter, outlawing their tradingas recently as last February.
With the above being said, it doesn’t mean that efforts to begin regulating cryptocurrencies aren’t underway in several other jurisdictions, such as Gibraltar, which brought a draft regulatory frameworkinto force on January 1stof this year.
Estonia has amended its Money Laundering and Terrorist Financing Prevention Act to require cryptocurrency exchanges to apply to the Registrar of Economic Activity prior to being allowed to operate in the country, but not much has been said about legislation being enacted there in the future.
Another example of moves being made toward regulating cryptocurrencies and cryptocurrency exchanges in certain countries can be seen in Switzerland. The Swiss Financial Market Supervisory Authorityhas issued guidelines in regard to the application of securities regulations to ICOs, but has added that it was analyse each ICO on a case-by-case basis due to how new the cryptocurrency industry is.
Why Does Malta Stand Out Over These Countries?
In a nutshell, it’s the Malta Financial Service Authority’s track record when it comes to pioneering regulation on controversial new industries. The island nation’s Remote Gaming sectoris a shining example of this. Back in 2004, Malta became the very first country in the EU to regulate Remote Gaming after managing to strike an ideal balance between innovation and stability.
The above is in addition to Malta being a well-connected investment location with an advanced communications infrastructure and a business environment that incentivises companies to invest, grow innovate and compete on the global stage. Its workforce is highly-skilled and fluent in English, and the working environment is characterised by high productivity and easy access to the rest of the world by air and sea. Furthermore, the island’s financial services industry is already robust and ready to take on the next step toward welcoming cryptocurrencies. Expect to see a flurry of new cryptocurrency exchanges in Malta in the near future!