The global economy is undergoing a transformation driven by a technological revolution, with established firms across the economy being challenged by a new wave of digital innovation. It is true for many economic sectors, but particularly true in financial services, where FinTech is making strong claims in changing the way that we bank, invest, insure and even pay for things.
The entire developed world will feel this change intensively. However, small jurisdictions appear to be taking a particularly pre-emptive role. Jurisdictions such as Malta and Singapore are leading the way in the creation and development of structures for clients, building businesses involving cryptocurrencies, digital assets and blockchain technology.
This is part of an evolution. Taking the case of Malta – during the last decades – we have moved away from traditional labour-intensive activities and have diversified our economy by offering a number of high, value-added, knowledge-driven services. Today, the financial services sector and the i-gaming sector represent over one-fifth of our economic output and employ a very significant portion of our work-force. This was made possible by being proactive and by taking advantage of the changing environment.
Blockchain is disruptive by nature and given Malta’s ability to adopt to change, coupled with the expertise and experience the jurisdiction has gained by having a strong presence in the financial services and gaming sectors, it made sense for Malta to take the lead and position itself as a natural hub for digital innovation. By being ‘The Blockchain Island’ we will be moving away from constraints imposed by our physical size and we aim to be among the movers and shakers in this space.
Malta will be offering legal certainty in a space which is currently unregulated. We are proposing a regulatory framework that is both very conducive to business while at the same time offering the highest level of protection for the consumers in terms of technology. It will also have very strong anti-money-laundering properties.
By the end of the first half of 2018, we will be ratifying three Acts: the first which will be seeing the setting up a new authority which will, among others, have the task of certifying technological arrangements. The second Act will present the legal framework around which this certification will take place, while the third Act, to be known as the Virtual Financial Asset (VFA) Act will be regulating virtual currency, ICOs, exchanges and all services providers.
Later this year, we also aim to push forward a further bill that will give legal personality to technological arrangements.
Our approach is holistic and practical, taking a notable principle-oriented view. In terms of cryptocurrencies and ICOs, we will be making a crucial distinction between a normal financial instrument and a ‘digital’ non-financial instrument. This, I believe, is central to our objective as we intend to put in place robust and transparent legislation without over-regulating or stifling innovation.
There is increasing confidence in what we are doing. The noise emitting from established centres in traditional finance is changing. Just a year ago, it was all about banning such activities. Now there is an increasing acceptance that disruptive technology cannot be stopped and that regulation is the only way forward.
There is no end to this journey. It is the nature of disruptive technology. This is very much like the rise of the internet a couple of decades ago. The only difference is that the pace is much more elevated. While the economic benefits of the internet took several years, this new technology will impact traditional sectors much faster.
Hence, in view of this, we want to make Malta, ‘The Blockchain Island’ — a vision that is being very well-received. Several global companies have already committed themselves to bringing their expertise to build a strong ecosystem for this sector. Malta is only weeks away from having innovative laws that will pave the way for the growth of this industry, depicted by many as the next revolution.
Member of Maltese Parliament, Member of House of Representatives since 2013