The Malta Independent 13 November 2019, Wednesday

154 blockchain companies chosen for Malta; ‘we want quality not quantity’ – Silvio Schembri

Albert Galea Sunday, 27 October 2019, 08:00 Last update: about 17 days ago

Albert Galea sits down with Parliamentary Secretary for Financial Services, Digital Economy & Innovation Silvio Schembri to discuss the newly-launched B Secure scheme, the soon to be launched space vision and the blockchain sector.

The B Secure Scheme was revealed last Wednesday; what is the aim of the government regarding this scheme?

If you tell me that the B Secure scheme is there to protect private companies, I will immediately tell you that this is not its aim. The aim is to begin instilling the concept of cyber security in the private sector. In fact, €250,000 is, in reality, nothing for those private companies, but the scope was – and I think it has been successful, and that we will widen it – for companies to understand the importance of cyber security. 

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Thanks to this, companies can have initial studies carried out that show their exposure, the risks and the gaps that they face. An educational campaign in a general sense was the starting point and from there people started to understand the risks of what can happen, which were illustrated through figures and different scenarios. Then, thanks to B Secure, these companies will have a report telling them what level of exposure they have – that’s where the scope of the scheme ends – and then it is up to the private company to make the real investment necessary to be protected.

Like this, however, we have made the first step, the absence of which may mean that a company does not take the initiative or does not even realise the risks that their business could be facing. Once the risks are realised, there will be investment – so that’s what we wanted B Secure to be.

 

This was announced at the National Cyber Security Summit which saw a substantial attendance – what has the response to it been?

The response has been extremely good. When I started talking about cyber security, it was a very flat subject. When we started off with our campaigns, we estimated that around 100 people would attend this summit – instead over 550 registered. The follow-up I had from this summit was one of considerable interest, which I did not expect, so I think it was a great success and I have already asked to check how we can widen it and carry out more measures to continue building from this starting point.

 

In recent years, Malta has seen a shift towards the concept of digital economy. How will the budget reinforce this concept?

Cyber security is everyone’s responsibility. On the government’s side, we have invested huge sums of money in this regard and this budget will see even more invested in government infrastructure. Obviously though, the government cannot finance the cyber security of private companies but we try to highlight its importance and incentivise investment through schemes such as B Secure.

In terms of government infrastructure, which comes through MITA, we are in a very good position. We are attacked quite frequently as a country and the fact that nothing is heard means that the set-up is good. If it wasn’t then you would hear about things.

Attacks tend to intensify when the country is under the microscope – for instance during presidencies, CHOGM and large conferences. During last Wednesday’s Cyber Security Summit, for instance, we had a unit specifically set up behind the scenes to keep tabs on all the systems because we knew that the summit could be a target.

We have a national cyber security steering committee which is made up of high-level personnel from entities such as the police and the secret service, which meets regularly to discuss attack trends and to share information. The Prime Minister himself could also be brought into the discussion if there is an attack that could destabilise the country. 

So as a country, I think we are well equipped. Obviously, you must keep investing to remain up-to-date with threats as they develop, but I am very happy with what is being done in MITA. The committee also involves itself in the private sector: they stepped in when BOV was subject to a cyber attack and noticed that the same attack had happened at other banks in other countries. By sharing information it is therefore easier to meet these threats. 

 

On this principle of sharing of information, the government obviously has such agreements with other countries but are you going to encourage this in the private sector as well?

I think sharing information between all private companies is a bit difficult, but the fact that the private sector is protected makes it easier for us to meet certain threats. If we are alerted to attacks on institutions and we see that this has happened more than once, then we communicate with the company’s intelligence about this possibility and advise them accordingly.

 

Away from cyber security, we have seen a number of announcements in terms of new strategies and visions. The space vision is one of these: can you elaborate on what this is?

This is to be launched soon.  It sounds extraordinary because it has got the word ‘space’ in it, but in reality it is on the same basis as, for instance, a ship strategy. In space there is commercial activity ongoing, and our strategy is purely to commercialise space – we’re not intending to send any rockets up. 

For example, there are thousands of satellites in space that have to be registered somewhere and since we are very competitive in terms of registration in areas such as aviation and shipping, we believe that we can replicate that success in this sector as well.

Research – an area in which I think we are lacking and where we require investment – also comes into it and we want to marry the two together. Space mining is another area that is being explored by various countries – from the United States all the way to Liechtenstein – and we want to offer these companies a base here. But we are not looking at space transport or space tourism, this was said straightaway.

In the coming months we will be able to release the strategy in a more formal manner, but it will be centred mainly on the above elements.

 

A landmark for this government was its adoption of blockchain, and becoming ‘the blockchain island’: is this bearing fruit?

There are those who have tried to say that it has been a failure but this is not the case at all. Discussions on the subject started some two years ago and progressed so that, a year ago, we tabled the required legal framework. We founded the MDIA, while we also gave it a basis for its operations and for the certification of innovative technology platforms. The VFA Act then looks at giving the regulatory framework required for cryptocurrencies.

Since we were the first country in the world with such a legal framework, we attracted a huge amount of interest from across the globe. Given this, we decided that we could not start from the first day. One cannot simply just apply for a licence – there is a full process that we had to go through, such as starting the process for the appointment of VFA agents, who are the first gatekeepers and who receive applications and carry out the screening process before the application is presented to the MFSA. 

Therefore on 1 November last year we announced that we would give companies that are already operating in Malta a year to submit a notification showing where they are operating, which then gives them a year to prepare their full application.

Initially, applications from over 300 companies working in the sector were received. The MFSA wanted to accept only the more substantial and serious applications, so of those 300 or so, only 154 applications were chosen and they then had a year in which to submit their application to the VFA agents and the system auditors.

Up until then, we also carried out tests for companies who wanted to be VFAs –which took some seven months – and we have certified 17 VFA agents and five system auditors with the probability that the number will increase.

A number of companies have now submitted a letter of intent as a pre-application. We are not interested in welcoming every application – we are only interested in quality when it comes to blockchain. This is a growing industry, so you have to keep in mind that there will be both good ideas and ones that are less than adequate. We initially had 900 companies wanting to come in. Over half of them were not of the required quality and we cut them out immediately.  From the remaining companies, we then made another selection to focus on the quality ideas.

We have a good economy so we are not interested in doing anything out of frustration or desperation to boost it. What we are looking for is sustainability and stability in the long term, which is why we only want the best companies and why we have a robust framework. Countries like France have copied our framework, while others such as Estonia have taken it and drastically lowered the restrictions. This is something that is not sustainable, as it will eventually be against what the EU is planning in terms of regulation. We are not interested in competing with other countries by lowering our requirements. 

Anyone who is joining in with the criticism that the industry is not working has not understood what we are doing. We have heard of some companies who have closed or moved elsewhere – which is normal in business; it doesn’t mean that the whole industry is failing. It’s the same in the gaming industry: we heard stories that a company had laid off staff – something we discovered was due to a merger – but at the same time the MGA are processing 134 new applications. Does the fact that a company closes mean that the industry is failing? Hardly – it is continuing to grow.

 

As we have said, there is a continued focus on new technology such as blockchain and now artificial intelligence as well. How is the government going to integrate this technology into its operations and services?

I think that, apart from being innovative in legislation, we need to be the ones to start operating with these technologies, which is what we have done.

We started with the education certificate; we are the only country in the world where every student’s certificate comes out on a blockchain system – called ‘blockcerts’. We also have a tender out for the registration of rents where there is an obligation for the use of a blockchain system and we are also working on a system for health data. We have the Registry of Companies at the Malta Business Registry where, by the end of the year, its whole system will be working on blockchain with AI integrated into it as well. This can help with processing applications – for example by comparing signatures on documents that are needed for the submission of applications.

We are also seeing this process in the identity sector, by implementing the once-only data principle where, again, there will be AI involved and where there is some €40 million invested on the convergence programme and mapping tomorrow. 

There are a lot of projects which we, as a government, are implementing. In fact, it has recently been confirmed that, even in eGov services. Malta has the best system in Europe.  These are the things which we want to continue working on; we want to be a role model when it comes to the implementation of this technology
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