Malta has a population of only 450,000 people. It’s a strange choice for a company as big as Binance, given it has operated in some of the world’s largest cities. However, a lot of governments all around the world are trying to regulate cryptocurrencies in their countries and have therefore cracked down on cryptos. Malta is one of the few countries that has a positive view and open position on cryptocurrency.
Malta is way ahead of the pack when it comes to cryptocurrencies with the Government being amongst the first to apply the specific and favourable legislation on cryptocurrencies. Moreover, the Malta Gaming Authority (MGA) is experimenting with how introducing digital currency in a controlled environment will affect Malta’s economy. The Estonian and Gibraltar governments are also trying to see ways in which they can take advantage of cryptocurrencies even as other governments are rebuffing cryptos. In fact, the Estonian government is trying to see whether they can release their own cryptocurrency, the Estcoin. The Slovenian Prime Minister has tried to meet up with blockchain startups to discuss ways in which they can promote cryptocurrencies.
Binance’s move to Malta has significantly increased the credibility of this small island when it comes to cryptocurrencies. This is to the extent that the Chief Executive Officer of Binance, Zhao Changpeng, (who built a $2 billion private fortune within 8 months), announced that Binance is going to set up a fiat currency to cryptocurrency exchange in Malta. The company is also working on closing a deal with local banks so that they can allow people to make deposits and withdrawals in this island.
Zhao clarified that their move was mainly because Malta was more open to crypto and fintech, based on the regulatory framework that Malta is putting in place.
When Binance announced their big move, the Maltese Prime Minister, Joseph Muscat, tweeted them a welcome message. This reinforced the Maltese government’s goal of diversifying its economy by being a center for digital asset ventures.
$2 billion worth of trades take place on Binance on a daily basis, so it’s quite clear why Malta is so open to this company set up their headquarters there.
The Maltese government is setting up a new agency called the Malta Digital Innovation Authority. The work of this agency will be to certify and control blockchain companies and how they run. The agency will also come up with a regulatory framework that will oversee how Initial Coin Offerings (ICOs) are carried out. Zhao, Binance’s CEO, and Silvio Schembri, Malta’s Parliamentary Secretary for Financial Services, Digital Economy & Innovation, took time to go over and assess fintech’s legislation personally. After this meeting, Zhao was convinced that Malta will be the new home to lots of blockchain companies and a key player when it comes to Europe’s blockchain ecosystem.
According to Schembri, Zhao could be right, and Malta could soon be referred to as the “Blockchain Island.” As a result of the move by Binance, a lot of other blockchain companies are following in their steps. The CEO of a blockchain company that specializes in entertainment tweeted that he is also seriously considering relocating from Singapore to Malta. Two other blockchain companies, Monaco and BigONE, also echoed the same sentiments.
Cryptocurrencies Are Now Legal in Malta
Belarus was the first country to make this historic decision, and now even Malta has finally legalized cryptocurrencies. The Maltese parliament has passed three bills that relate to regulating the use of cryptocurrencies and ICOs in Malta.
All the three bills were approved, therefore, rendering cryptocurrencies legal in Malta. This big decision has been widely celebrated by blockchain companies and investors from around the world. These decisions were passed fast once the bills went before the parliament, even though there was a bit of concern and speculation about the positive vs. negative outcomes of doing this. The aim of these bills is not only to protect investors but to protect the integrity of the financial markets as well.
However, before these bills were passed, lots of research and data collection took place between October and November 2017. This was done by the Maltese government in association with MFSA. The intention was to gain wide feedback on ICOs and the cryptocurrency world. They consulted not just local but also international stakeholders.
The Three Different Bills
- The first bill that was passed was the Malta Digital Innovation Authority Bill. This gave rise to Malta’s Digital Innovation Authority. This is an agency that has been given the responsibility of monitoring the internal governance of these companies. It will be responsible for assessing all companies that want to use the DLT (Distributed Ledger Technology) platform.
- The second bill is the Technology Arrangements and Services. Its main task is to register technology companies and certify technology arrangements. Part of this includes system administrators and auditors.
- The third bill is the Virtual Financial Assets Bill. This bill controls how ICOs (Initial Coin Offerings) are undertaken. It also outlines procedures that cryptocurrency exchanges are meant to use. This will impact brokers, exchanges, wallets, asset managers, and investment advisors. This bill also gives the Malta Financial Services Authority (MFSA) the power to question a company and ask it to provide information. It can also give rules and directives to the company. MFSA even has the power to suspend an ICO or even stop a cryptocurrency from being traded in exchange.
What Will Change?
Malta will soon become the preferred base for cryptocurrency companies. This is because of its close proximity to the European Union and the Commonwealth. Since the Maltese government has welcomed cryptos with open arms, it’s expected that many crypto traders, investors, and companies will soon flock to Malta. This will turn Malta into a crypto hub and development base.
There are so many cryptocurrency companies that are coming up. These companies are looking for a safe haven from where they can operate. The Maltese government is providing a sound legal framework that makes this possible. You can legally register your company in Malta and run it from your own country, or you can set up your company or crypto exchange in Malta and run it there.
This provides quite a good foundation for the many blockchain companies that will hold ICOs in the future. This will even provide more stability for the entire blockchain industry to become more stable. Technoloader is an Indian-based Blockchain company, and they are quite enthusiastic about this historic decision made by the Maltese government. They will support you if you make the decision to move to Malta, and even offer you their services to help you set up crypto exchanges.
There’s so much FUD in this industry. This is given the fact that as much as there are success stories, there are also a lot of failures. There are also questionable investors and business models. Not all companies are as structured and successful as Binance has been. Also, the currency rates are quite volatile. For example, the price of Bitcoin moved from US$1,016 to US$19,843 within just 12 months. This has led many people to speculate that it’s just a matter of time before the cryptocurrency bubble bursts and the market crashes.
There are also safety issues that need attention. For instance, cases of Bitcoin hacks went up by 33% between 2009 and 2016. Hackers from countries such as North Korea are now focusing on trying to hack cryptocurrency exchanges and traders in a bid to evade sanctions. COINCHECK, a cryptocurrency exchange, lost $ 530 million in January 2018 since they hadn’t put the right security measures in place.
Consequently, lots of governments are putting various measures in place to try and protect their citizens from losing money through cryptocurrencies. This has resulted in some governments either completely prohibiting or outlawing cryptocurrencies. The CEO of MGA, Joseph Cuschieri, stated that cryptos are double-edged swords; they provide a great opportunity but with substantial risks. Since major financial companies or bigger governments are not willing to embrace these risks head-on, this has left an opening for smaller economies such as Malta to be the market leaders in this area.
There are other reasons too why blockchain companies find Malta to be quite appealing. The country is quite open when it comes to regulating cryptocurrency. It also has a positive outlook on cryptocurrencies, and it’s quite open to development in this area. Since a lot of blockchain companies are facing pressure in their home countries, they would be very willing to move to Malta.
Also, Malta is home to a large number of companies that develop software. It also has lots of digital legal professionals and financial experts who have a good digital knowledge. These are some of the things that have contributed towards it being more open to the crypto sector.
The move by Binance to relocate to Malta has gained a lot of attention from the press. The Maltese government is taking advantage of this as this is quite a major economic milestone. Malta’s other economic advantages include a low unemployment rate and one of the highest economic growths within the EU.
All these factors make this island quite attractive to investors. Consequently, several blockchain companies are now looking towards relocating to Malta. This is so much easier than having to handle all the pressure that other countries put on blockchain companies. It’s also much easier for companies to set up their offices there and continue their operations.
The Mass Migration to Europe
There isn’t much that’s going on when it comes to cryptocurrency regulation in Europe. If nothing continues to happen on this front, then things might get quite fascinating between Europe and Malta. Since other countries are cracking down on cryptocurrencies, it’s important that someone provides direction in this aspect.
China, India and a few countries have reacted strongly against cryptocurrencies. They have been quite negative and are more focused on completely banning it. Despite the innovation that cryptos bring, a lot of governments feel quite threatened by it, and it has become quite difficult to regulate this industry. The end result is that most companies may end up relocating. For instance, Bitfinex is moving to Switzerland and Kakao is likely to hold its ICO outside South Korea.
There’s still a lot of uncertainty about how everything will work out. However, one thing that’s sure is that Malta’s impact in the cryptocurrency world is going to increase. Who knows, other countries might be more positive about crypto in the future. At the moment, there are positive and negative developments in this industry. But you can be sure that a negative reaction to cryptos might not be the best thing. There’s still so much uncertainty about whether things will get better in countries such as China and India.
As financial regulators scrutinize this issue more closely, their main focus might be directed more on the exchanges. They might also focus more on getting regulations that lean towards confirming the identities of the people that are operating these currencies in a bid to prevent money laundering. This can help to clear up some of the major challenges that cryptos face and significantly increase the chances of cryptos becoming a more widely recognized and accepted form of day-to-day payment all over the world.