Malta is enjoying a first-mover advantage and is being used as a ‘sandbox’ for a range of licensed products when it comes to blockchain, according to Prof. Robby Houben, who authored the TAX 3 Report on Blockchain and Crypto for the European Parliament.
Prof. Houben was speaking at a blockchain and crypto event on financial crime, money-laundering and tax evasion organised by the Institute of Directors Malta Branch.
Prof. Houben also said that Malta is doing more now than AMLD5 will require when it comes into force in 2020. AMLD5 amends and repeals EU Directive 2015/849 of the European Parliament and of the Council of May 20, 2015, on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing.
He praised the Maltese regulator and the Maltese government for “being ahead of the curve”, saying that the Virtual Financial Assets (VFA) Act is “very relevant” and that, in his view, the framework for the jurisdiction is bold and timely. His one note of caution was that “risks associated with mining businesses are underestimated”.
Christopher Buttigieg, director of Securities and Market Supervision Unit at the MFSA, said Malta “started from scratch” when it came to framing legislation and setting processes and procedures to regulate as well as license blockchain and cryptocurrency entities. He explained that those drafting the legislation found parallels to traditional financial services and decided to apply high-level principles rather than take a rules-based approach. The goal in all cases, said Dr Buttigieg, was investor protection.
Dr Buttigieg underlined that VFA agents play a vital role to ensure that only the right people enter the regulatory system. He also referred to criticism from the industry that the MFSA was being too ‘draconian’, having imposed a system of examinations coupled with stringent interviews prior to licensing VFAs. Being one of the first regulators in crypto assets, he said harmonisation would prove to be key, saying that the “biggest risk is that a crypto asset is ‘A’ in Malta and defined as ‘B’ elsewhere”.
“We need a European framework,” he added, to promote further development.
Representing the industry view, CEO of BDXAlliance Jamy Nigri said that crypto companies offered significant improvements over previous financial services models, cutting costs drastically, simplifying transactions and speeding up the transfer of funds. He claimed the current banking system is “broken” and that new models will sweep away this broken system in the same way that “one hour dry-cleaning revolutionised that business”.
He said that BDXAlliance offers an easy, integrated, secure and single source platform. Moreover, it’s inclusive: from converting crypto to gold, air miles and much more. “We’re democratising investment and products and services, so the many, and not just a few, can benefit from them.”
Mr Nigri continued that within his platform, ordinary people can have all that they need to use blockchain and crypto: “How does my phone work? Who cares! It means someone, whether an individual or as part of a business, gets to benefit from a whole range of products and services to make their everyday life easier. On top of that, we’re on track to be the world’s first blockchain and crypto ecosystem that’s fully licensed and regulated.”
In a Q&A moderated by Malta Digital Innovation Authority CEO Stephen McCarthy, the panel faced questions from both the moderator and a very engaged audience. Prof. Houben contended that central banks should have their own crypto because “this legitimises and makes the system trustworthy”.
Mr Nigri made an impassioned plea for democratisation of investments to get “millions of micro-investors into the system” while Dr Buttigieg outlined how the MFSA is seeking out best practice and travelling the world to ensure that Malta remains positioned as a world-leading jurisdiction for cryptocurrencies.
The event was moderated by IoD chairman Edwin Ward.