A well-attended FinanceMalta Blockchain seminar was held last December to satisfy the constant demand from the public to know more about this silent revolution. It was opened by consultant Steve Tendon followed by other speakers, notably James Catania with a presentation entitled 'How does it work', followed by Ian Gauci, Founding Partner of GTG Advocates who spoke about the legal and regulatory aspects. Another interesting speaker was Joseph F. Borg, VP of BitMalta, who expounded his views on how and when Malta can embrace cryptocurrencies and usher in the Blockchain technology.
The government believes this is the next big thing and recently three bills were presented in Parliament piloted by junior minister Silvio Schembri. The latter admits that the government cannot do it alone and is opening doors to various consultants and experts to come with ideas and know how. Mindful of the legal and technical minefield that lies ahead in this innovative technology, he called for experts to help design and think about parameters within a safe framework and good governance. Most probably, the first user of the technology would be the iGaming industry since the use of cryptocurrencies might attract new players, but there are other sectors.
It is an open secret that the government is keen to be seen helping innovation and would like to see Malta become a jurisdiction that attracts talent from all over the world. Little Malta can become an economic superpower. But how can bitcoin become mainstream since banks have resisted it tooth and nail. All this makes familiarisation with the tantalising coin more difficult to assimilate such an ill-fated concept which is still in its infancy, having been conceived in 1995. One can expect to see furrowed faces when the technology has to be digested by users trying to grapple with the jargon. To help clarify the jargon one can simplify the myth by describing Blockchain as the track while bitcoin is the train.
Regardless of the resistance to change the current framework of fiat currency, one cannot but admit that it boils down to an issue of trust. We run billions of transactions in fiat currency which is not backed by any intrinsic value since we have no option but to trust such paper currency. We know that due to the policy of Quantitative Easing practised in EU and USA has seen the printing of billions of paper currency by central banks to calm the markets and wipe off excess liquidity. Holders of fiat currency have blind faith in its exchange value.
How does Blockchain technology solve this dilemma? The answer is Blockchain deciphers the trust issue. We can ask ourselves five questions. These are - Do we really trust the intermediaries? Do we trust credit cards, do you trust your transactions represent real value, and do we trust banks, our government? Without going into the controversy which arises from answers to these questions, one can do a reality check by saying that if and when cryptocurrencies achieve mainstream status, then the trust will peak. We have all heard about Bitcoin, Ethereum and other variants which currently form part of a popular framework, yet there will be others.
Located in Valletta is a company called Grand Central; it has a service office and is fully operational concerning payments in bitcoin. This service was recently launched by Ravinder Deol, himself an international producer of cryptocurrency training courses. It is interesting that Grand Central is the first of its kind in Malta and offers membership plans to suit different working styles, ranging from a hot desk by the hour to a dedicated co-working desk or private office rented by the month. In addition to providing members with fully serviced workspaces, Grand Central also has exclusivity in Malta to offer international partnership services. Its website states that thanks to linkup in London it offers guest membership of five business clubs in UK operated by The Brew, providing members with a London base and business community with whom to network.
Iain Harvey, founder of Grand Central, said: "We are always looking at what extra flexibility we can give our members and this time we offer payment channels. It is undoubtedly true that cryptocurrencies have had a very volatile year but Grand Central feels that their flexibility is paying off as membership numbers continue to increase." This begs the question - if Blockchain is the forerunner of cryptocurrencies then why is the European Central Bank taking such a risk adverse attitude to its operation? Banks in Britain and the United States have banned the use of credit cards to buy Bitcoin and other "crypto currencies", fearing a plunge in their value will leave customers unable to repay their debts. Here one can mention that Lloyds Banking Group plc recently said it would ban its credit card customers from buying crypto currencies, following the lead of JP Morgan Chase & Co and Citigroup. This is an altruistic effort to protect customers from losing money due to high volatility of currencies but deep down banks fear that the mainstream use of Blockchain will become a formidable challenge to their core profits.
The good news for the novelty currency is that the ban extends only to credit card purchases, with debit card users still able to buy crypto currencies. It is an undeniable fact that cryptocurrencies are here to stay and are growing at a fast rate. Joseph F. Borg, VP of BitMalta, thinks the technology will also change the banks, whether they like to embrace it or not. It goes without saying that banks will at some time in the near future invest generously to embrace this technology as this revolution will definitely make fund transfers more efficient and reduce costs of international trade.
This way the entire planet gains.
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Mr Mangion is a senior partner at PKF, an audit and consultancy firm.