Malta’s prime minister is doubling down on the booming blockchain industry in a bid to diversify the European Union’s smallest economy — and to even fight corruption.
“We’re taking a calculated risk,” Prime Minister Joseph Muscat said in an interview on Monday, by cutting “layers of bureaucracy” and offering fast-track approvals for digital players to set up shop on the island.
With tax rates as low as 5 percent, the government recently passed laws that seek to ease the trading and issuance of cryptocurrencies. Malta’s stock exchange is also in talks with companies to list digital assets.
The aggressive steps to become one of world’s friendliest jurisdictions in the industry appear to be working.
Crypto exchange Binance, founded last year in Hong Kong and now one of the largest, said in March that it’s moving to Malta after regulators in Asia cracked down on virtual money. The island is capturing an outsize share of crypto trading, according to research from Morgan Stanley, while Binance is working with other investors to create Founders Bank — an institution servicing digital clients registered in the island.
“We have tourism, we have the service industry, we have finance and gaming,” Silvio Schembri, parliamentary secretary for financial services, digital economy and innovation, said. The country is working with auditor PricewaterhouseCoopers to launch blockchain licenses for regulated entities, which will be issued in November, he said.
Regulatory scrutiny around the world over digital-trading platforms continues, thanks in part to concerns regarding customer protection. So too has scrutiny over Malta’s recent economic success, overshadowed by money-laundering concerns.
The European Banking Authority recently said that the Maltese watchdog breached anti-money laundering rules after concluding that the Maltese Financial Intelligence Analysis Unit failed to conduct effective supervision of Pilatus Bank.
“I see blockchain as a technology being part of a solution when it comes to due diligence and anti-money laundering procedures,” Muscat said. “We’re quite aware of AML issues all across Europe and I don’t think it can be pinned down on one particular country such as Malta.”
There’s wide disparity in how financial authorities view cryptocurrencies. French authorities in February enforced tough reporting standards and barred electronic advertising, while Swiss officials are vying to become a “crypto nation.” China, for its part, has banned initial coin offerings and curbed local trading. The U.S. has dragged its feet on clarifying legislation.
“In the same way that we came up with our regulation when it came to online gaming, we are trail blazers in all this,” Muscat said. “I think we can replicate this in this area too, where the EU will at the end of the day be doing what we are very much doing right here today.”
While future regulation remains uncertain, those on the ground remain optimistic. At a recent dinner in Malta with politicians and bankers, Michael Bianchi, the chairman of Binance-backed Founders Bank, toasted the future of Malta, dubbing it the “Blockchain island.”