In an ECB report on virtual currencies issued six years ago, unenthusiastic comments were expressed on the future of 12 products and services. Fast forward to the present and one finds that despite the volatility of the market, a good seven of them are still going strong to this day and some have actually become dominant players on a global scale. This is thanks to the strength of the social media and the publicity that supported the project. It is the social media's popularity which made the phenomenon grow to such an extent. There were a number of casualties. In passing, one cannot omit to mention the fatal setback suffered by the AurumXChange.

This was a harbinger of the fragility of the sector. The lesson was spelt out that offering an exchange service in the virtual currency market requires an overwhelming level of security. It is important to recall that during the short history of crypto currencies, we come across Bitbill and Withdraw2Card which offered virtual currency ancillary services that eventually became redundant due to the merger of services led by market forces. Six years ago, the ECB was rather sceptical of virtual currency schemes, seeing the glass half-empty and not half-full. It is to be expected that a conservative banking regulator would take a cautious approach to virtual currency. However, the community has learned some lessons from the painful birth pangs of the sector.

There have been a number of early devotees who with luck and foresight became rich on Bitcoin. Others were less fortunate. It is true that there are inherent risks involved in holding any virtual currency that cannot be ignored and because of this, the ECB seemed to favour centralized virtual currencies as opposed to decentralized ones such as Bitcoin. Nevertheless, the novelty that was born 10 years ago in Japan may not waste away so easily.  

This year, Malta started to flirt with Blockchain technology - one that gave birth and support to virtual currencies. It passed a number of untested and untried laws to regulate blockchain and its derivative services. Having just about harnessed the celebrity of blockchain, we now switch our sights on trying to scale the mountain of Artificial Intelligence (AI), into which tech giants in the USA pour billions of dollars annually in research and development. Mindful of the legal and technical minefield that lay ahead, the government formed a group of experts to help design and draft parameters leading to a safe framework and good governance in the field of Artificial Intelligence. It is an open secret that the government is keen to be seen welcoming innovation and would like to see Malta become a jurisdiction that attracts talent from all over the world.

Little Malta aspires to become an economic superpower in the Med. But how can virtual currencies become mainstream unless Fintech is attracted to Malta to support it? At present, no bank in Malta supports Bitcoin although efforts are in the pipeline to attract newcomers. It is always a case that ECB, banks and monetary institutions are wary of the new challenges of virtual currencies but like the internet which was resisted in its early days, the crypto revolution is here to stay. Since we left the Gold Standard, we have run billions of transactions in fiat currency which is not backed by any intrinsic value yet we blindly trust such paper currency.

We know that following a series of Quantitative Easing practised in EU and USA, this exercise led to the printing of billions of new paper currency by Central Banks to calm the markets and wipe off excess liquidity. It is all a matter of trust. How does Blockchain technology solve this trust dilemma? The answer is Blockchain deciphers the trust issue. Typically, we ask ourselves five questions.

These are: Do we really trust the intermediaries? Do we trust credit cards, do we trust that transactions represent real value, do we trust banks, our government? Without going into the controversy which may arise from answers to some of these questions, one can do a reality check by saying that if and when cryptocurrencies become mainstream, trust will peak. We all heard about BitCoin, Ethereum and other coin variants which currently form part of a popular framework, yet there are many others. The technology has found a shelter close to us.

There is a company in Valletta called Grand Central that has a service office which is fully operational concerning payments in Bitcoin. This service was recently launched by Ravinder Deol, an international producer of cryptocurrency training courses. It is interesting to note that Grand Central, the first of its kind in Malta, now 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 the 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 it's offering payment channels. It is undoubtedly true, that cryptocurrencies have had a very volatile journey in 2018, yet Grand Central feels that their flexibility is paying off as membership numbers continue to increase."

 Not surprisingly, 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. On a positive note, one can cite Joseph F. Borg, VP of BitMalta, who thinks the technology is resilient even though it suffered setbacks when climbing up the slippery nursery slope. Reaching its zenith, it will transform banks, whether they like to embrace it or not. The unassailable rise of virtual currencies is not something out of a Marvel comic story.

[email protected]

Mr Mangion is a senior partner of PKF, an audit and consultancy firm. He can be contacted at [email protected] or on +356 2149 3041