Muscat’s cryptocurrency fixation - Arnold Cassola

Photo: Shutterstock

Photo: Shutterstock

The world continues describing Malta as a centre for the laundering of dirty money, with Tourism Minister Konrad Mizzi, OPM chief of staff Keith Schembri, and Pilatus Bank at the heart of all the insinuations.

Our financial institutions and regulators, tasked with protecting our financial reputation, have also been under heavy attack: Joe Bannister’s MFSA accused of dishing out bank permits to the likes of Pilatus or Nemea, without the appropriate due diligence having been done… appropriately; FIAU accused of keeping under wraps damning reports on key actors in our political and financial circles.

Yet, in the face of this global assault on our financial credibility, rather than addressing the existing problems and ensuring that no more loopholes exist, Prime Minister Joseph Muscat and Finance Minister Edward Scicluna did nothing, apart from adopting a defensive attitude, accusing all those who were pointing out the defects in our system of being jealous, if foreigners, or traitors, if Maltese.

An attitude typical of Latin America banana republic dictators.

And, in the midst of all this barrage, in April last year Muscat comes up with his latest megalomaniac dream of making Malta “the frontline in embracing Blockchain and Bitcoin”.

“We must be the ones that others copy,” he said.

Now, what is this cryptocurrency that Muscat is so keen on? One of the many definitions on internet reads: “Unlike centralised banking, where governments control the value of a currency like USD through the process of printing fiat money, government has no control over cryptocurrencies as they are fully decentralised.”

Basically, our Prime Minister would like to be on the frontline, pushing for a currency over which government has no control, over which banks have no say, a currency that can easily bypass supervision and whose flows it is very difficult to monitor.

In view of the money laundering accusations our country is being subjected to, I do find the timing of our Prime Minister’s love at first sight for cryptocurrencies quite misplaced and mistimed

In view of the money laundering accusations our country is being subjected to, I do find the timing of our Prime Minister’s love at first sight for cryptocurrencies quite misplaced and mistimed.

Of course, Muscat might have very good intentions. We all know that all that counts for him is investment, money and enrichment and, with this in mind, he may be thinking that by making Malta the first, it becomes a safe harbour for these “crypto” entities to base themselves here.

Consequently, our country would prosper with all the wealth accumulation as long as the game continues.

But the risks involved are enormous: first of all, history is full of examples of fake currency, issued by non-regulated entities and not by a government – these always end in tears.

Secondly, its supporters speak of blockchain technology as the basis for the cryptocurrency’s integrity. Indeed, the blockchain technology has its good points but it is untested and we have no idea how resilient or robust it is to manipulation. They speak of “mining” as if there were some sort of physical activity, when there is none at all.  The cost and security is justified by the “server farms”. Let us again not ignore history: the road to economic ruin is paved with financing things on farms: cows, grains and other soft commodities.

The third source of great worry is that Bitcoin is supposedly a stable store of value... yet it has a highly volatile price history. This is totally incompatible with solidity and stability. While the going lasts, it is absolutely great. But once the game stops it will become a real mess for the whole population to unravel.

Foreign media, and even individuals active in banking circles overseas, have highlighted the fact that the image this whole set-up conjures up is that of being the 21st century version of a protected pirate den ... but then isn’t this what Malta was during the era of the Knights?

While understanding Muscat’s possible good intentions in trying to attract further wealthy people to Malta, I believe that with our country’s reputation at stake, we cannot afford venturing into such “Russian roulette” schemes.

Clearing up the international reputational mess bequeathed to us by Mizzi, Schembri, Tonna, Pilatus and co., would definitely be a much safer and more rewarding investment.

Arnold Cassola is former Alternattiva Demokratika chairman and former secretary general of the European Green Party.

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