George Rotariu uses Romania’s first bitcoin ATM in downtown Bucharest. Photo: Bogdan Cristel/ReutersMalta ranked 131st in a recent survey of the countries most likely to adopt Bitcoin.
The Bitcoin Market Opportunity Index ranked 177 countries and was based on nine sources of information, ranging from the World Bank and IMF to CoinDesk and Google Trends. It comprises 39 variables such as technology penetration, remittances, inflation, financial repression and Bitcoin penetration. Argentina emerged as the most likely, followed by Venezuela and Zimbabwe, pushed up the ranks by their high inflation.
So far, Bitcoin regulation varies greatly from country to country but some jurisdictions are seeing it as a tremendous growth opportunity. The Isle of Man, for example, is poised to create a regulatory environment that is conducive for Bitcoin business.
However, the Isle of Man Financial Supervision Commission subsequently warned that there was no consumer protection for entrants in the digital currency market and such businesses would only fall under its remit if they were engaged in regulated activities such as money transmission services.
“It is not the appropriate time to introduce such a regime until the market develops and international consensus on the matter is reached,” it said recently.
The possible uses of Bitcoin are still evolving. It could be used as an e-gaming currency as the ‘digital anonymity’ of its owners could be used to overcome the cross-border restrictions currently imposed on various jurisdictions. These restrictions are officially there as a way to protect their players for the greater public good, but they are also a way to prevent revenue leakage from the country, and as such have repeatedly fallen foul of competition rules.
Volatility... is not an inherent quality of the digital currency
Anatoliy Knyazev, founder of the first Bitcoin hedge fund, handled by Malta-based Exante, is uncomfortable with the idea of Bitcoin being used to circumvent rules – for any reason.
“After a period of volatility, there is now much more awareness of the advantages Bitcoin offers so many businesses. We do not think it would be a good idea for it to be used for negative reasons!” he said.
At the moment, few countries are willing to face the complex regulatory minefield that Bitcoin would entail. Mr Knyazev would like to see Malta taking a proactive stand, saying the country was normally very proactive.
“I understand that people were afraid of volatility in the past but this is not an inherent quality of the digital currency; this is just a by-product of its youth,” he said. “Its price has been around $600 per Bitcoin for the past two months now. It is more volatile than the euro but better than many emerging currencies, and is comparable to the price of gold for the past 30 days.
“Times have changed. There are now Bitcoin dispensers, for example, which accept most currencies. Expedia accepts Bitcoin for travel and you can buy a Dell computer with the currency.”
Mr Knyazev sees a wealth of opportunities for Malta, saying there was a “pipeline of businesses” looking for a reputable jurisdiction: “The first jurisdiction to have good regulation would get a lot of business and create a lot of employment.
“At the moment, the US seems to have the most favourable outlook and wants to regulate the use of Bitcoin for exchanges and payments. But there are very high barriers to entry, such as upfront capital, background checks, different licences for each state and so on. Any country which could offer a more user-friendly ecosystem would have a competitive advantage.”
Regulating a digital currency is not straightforward, he admitted, as it could potentially involve the Malta Financial Services Authority, the Lotteries and Gaming Authority, the Malta Communications Authority and the Central Bank of Malta, for example.
“All we need is a signal from the government giving us direction. We believe that we have everything in place – even the current tax framework would be sufficient – but we cannot proceed until we get the green light. The country could be looking at billions in just a few months,” he said.