The Malta Independent 22 September 2018, Saturday

Can Malta be trusted with Crypto?

Alice Taylor Sunday, 20 May 2018, 11:00 Last update: about 4 months ago

Over the last 10 years, Malta has worked hard to become one of the world’s leading jurisdictions for iGaming and related industries. The sector employs thousands of local and foreign individuals, is worth a bomb in tax euros, and contributes a whopping 12 per cent to the country’s annual GDP. Of course, as with any industry where billions are at stake, there are bound to be shady dealings – whistleblowers at the MGA, links to the Mafia and dodgy Russians, tales of businesses operating without the correct licences, the list goes on. But when all is said and done, the industry has been an integral part of Malta’s economic growth and due to its popularity numerous other industries have sprung up to create a diverse and disruptive digital ecosystem.

ADVERTISEMENT

One of these industries that have come to prominence in the last 18 months is that of cryptocurrencies, blockchain, and Initial Coin Offerings (ICOs). An exciting new set of technologies that is set to revolutionise not just the financial sector, but also every aspect of our lives, has caused widespread controversy and concern across the world.

While on paper cryptocurrencies are a fantastic idea, the reality is that we are a long way from having a system that really works. ICOs? A necessary evil. Lucrative and risky, legally dubious and prone to scams and fraud, once cleaned up they have the potential to revolutionise the way that people invest in businesses and start ups, but we are just not quite there yet. In terms of blockchain technology, the possibilities are endless, and I believe that we are looking at something that has as much potential as the internet did when it was first presented to a cynical public.

However, there are a couple of problems. At the moment, cryptocurrencies are something of a legal grey area. They are anonymous and allow users to transfer any amount of money instantly, across borders, and without a fee, and the sender can then disappear into the ether without having to explain where the money came from or why it was being transferred.

Can you see a problem here?

Unless you have been living in a cave or under a rock for the past two years, you are probably aware that Malta is in the middle of a little bit of a PR disaster. Accusations of money laundering in government, businesses, authorities, and even its banks, Malta is unfortunately considered as something of a haven for those that wish to clean their illicit funds. Whether it is pumping it into online gaming, setting up complex company structures, depositing it in Pilatus Bank, or giving your favourite politician a rather generous bonus, there is no shortage of evidence, proof and allegations of nefarious financial activity. Malta is being watched by the rest of the world, and most certainly the EU, and it needs to tread carefully when it comes to crypto.

Of course, Joseph Muscat, being the forward thinking, business minded individual that he is has welcomed cryptocurrency with open arms. His government are in the process of passing three Bills through Parliament that will make Malta the world’s first jurisdiction to create a comprehensive legal framework that will not only regulate the sector, but will also encourage and support its growth. Shortly after this news broke, the world’s largest cryptocurrency exchange, Binance announced that it would be relocating to Malta after the authorities in China and Japan made business almost impossible.

While this is great news for Malta, its people, and its economy, I cannot help but have my concerns. With Malta’s reputation in decline and accusations of money laundering, corruption, and large-scale bribery running rife, opening the country’s arms to such an industry should be done slowly and carefully. My concern is that instead of creating a new source of income that will keep the country afloat for generations to come, corners will be cut, under-the-table deals will be made, eyes will look the other way and the industry will flounder due to a crippled reputation and irreparable damage.

While Malta’s enthusiastic support of crypto and blockchain is to be commended, I cannot help but think that a little bit of restraint should be exercised as well. In the midst of an international scandal, we cannot be seen to be too quick to embrace a technology that at the moment facilitates the exact crimes that some of the legislators are being accused of. If Malta wants to be taken seriously as a hub of fintech-related industries, some intensive cleaning up needs to be done, and soon.

In short, this is one of the best opportunities Malta has to build a new facet of its economy as well as rebuilding its international credibility. My message to the government is, do not be blinded by greed, stop lining your own pockets, think of your country and its people, and most importantly, do not screw this up.

 

  • don't miss