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Malta has made it obvious that it wants to become the “Blockchain
island” and it seems determined to achieve its goal.
A notable confirmation that Malta is moving in the right
direction regarding Distributed Ledger Technology (DLT) regulation
was the recent announcement by Binance.
The largest cryptocurrency exchange in the world by volume chose Malta for their new
headquarters after the warnings received from Japan, China
and Hong Kong.
Binance CEO Changpeng Zhao, known as “CZ”, welcomed other
projects to Malta such as Tron:
Silvio Schembri, Junior Minister for Financial Services, Digital
Economy & Innovation within the Office of the Prime Minister of
Malta, commented to Cointelegraph on the news:
“Binance’s decision is a vote of confidence in what
we’re offering as a country and as a Government in this sector,
that is legal certainty in this space. During the meeting with CZ I
explained our long-term vision reflected in the policy document
that was launched in February, ‘Malta - A leader in DLT
Regulation.’ We are not shying away but instead want to unleash
the opportunities that holds by regulating the sector without
stifling innovation. Ultimately our vision is to make Malta ‘The
Blockchain Island’.”
Why has Binance moved to Malta?
Binance wants to offer
fiat-to-cryptocurrency deposits and withdrawals which will improve
its liquidity and open their platform to new investors entering the
space with fiat purchases. Currently, very few exchanges offer this
option, which forces investors to look for other hedging
alternatives such as the stable token Tether to protect themselves
from the high volatility and correlation of the cryptocurrency
markets.
Malta has warmly welcomed Binance, which hopes to start soon
partnerships with local Maltese banks to enable
fiat-to-cryptocurrency deposits and withdrawals within a few
months.
The second goal of Binance’s roadmap in
Malta is to mitigate the risk posed by their centralized system and provide
their customers with a decentralized and trustless solution not
only due to an ever increasing demand for ultimate security and
transparency but also because of the competition that centralized
platforms will face from projects such as Polkadot or Cosmos Network.
These new interoperability entrants, by implementing solutions
such as "Peggy" (Ethereum Peg Zone), could trigger the raise of a
new kind of decentralized exchanges which can be based on, for
example, the 0x protocol, allowing for not
only token but also cross Blockchain value exchange.
Furthermore, in the near future, these exchanges could be done
in a fully anonymous manner thanks to other interconnected privacy
focused chains such as ZCash and its Zk-STARKs or Sentinel Security and its
built-in coin mixer.
It is therefore unsurprising that one of the goals of Binance in
Malta would be to develop its own decentralized exchange given
their awareness of all the upcoming innovations and potential
competitors.
Ian Gauci, legal expert for the National Blockchain Strategic
Task Force within the Office of the Prime Minister, provided
Cointelegraph with his opinion about Binance’s decision to move to
Malta:
“Usually operators opening in Malta would look at the
whole ecosystem and assess the country’s potential from that angle.
On the DLT front, Malta builds on the excellent reputation and
track record in gaming, maritime and financial services. Hence, in
my view, the value is already there. This value is further
augmented by the country’s predisposition to DLT and innovation and
the recent announcements on the intended legislative framework in
this sector. I believe this was a crucial aspect in attracting
Binance and in all likelihood other outfits on DLT and in the
crypto sphere might share Binance’s view and likewise come to
Malta.”
Also, a founding member of the Blockchain Malta
Association, Leon Siegmund, shared with Cointelegraph his thoughts
about the current developments in DLT regulation in Malta:
“Entrepreneurs in the Blockchain field need a business
environment and clear, simple rules that are long-term guaranteed.
Binance delivers a service trusted by millions of users worldwide
and provides high quality employment of which the Maltese economy
will benefit. Ultimately, it is undoubtedly clear that blockchain
and Bitcoin is beyond the stage of being just a hype or underground
experiment with millions of people investing - it will bring
decades of prosperity.”
Maltese Blockchain regulations
Malta has been proactive and efficient in its efforts to provide
a legal framework for DLT. A consultation document related
to the enactment of three proposed pieces of legislation was open
for feedback until early March. These three pieces of legislation
are summarized as follows:
– MDIA (Malta Digital Innovation Authority) Bill
Firstly, the MDIA Bill will consist on the
establishment of an authority, the “MDIA”. The Minister responsible
for Digital Economy will select the Chairman and Board of Governors
of the MDIA. The MDIA Bill will also establish the Joint
Co-ordination Board (JCB) and its scope will be to ensure effective
cooperation between MDIA and other National Competent Authorities
(NCAs) in the area of technology uses.
Moreover the MDIA Bill will establish the National Technology
Ethics Committee (NTEC) which will ensure that the proper standards
of ethics are reflected in the use of relevant Technology
Arrangements and to guide other NCAs in Malta.
– Technology Arrangements and Service providers (TAS) Bill
The second piece of legislation will be the TAS Bill
which will set out the regime for the registration of Technology
Service Providers (auditors and administrators of Technology
Arrangements) and the certification of Technology Arrangements (DLT
platforms and related smart contracts).
The MDIA will be the national competent authority responsible
for these registrations and certifications. The proposition is that
any person will be able, on a voluntary basis, to request the MDIA
to certify a Technology Arrangement or to register a Technology
Service Provider.
– Virtual Currencies (VC) Bill
Finally, the VC Bill will provide the regulatory
regime and framework for Initial Coin Offerings (ICOs) and for the provision of
certain services related to VCs. This regime will cover brokers,
exchanges, wallet providers, advisors, wealth managers and market
makers dealing in VCs.
Some examples of practical applications of the above proposed
legislation would be the certification of a DLT platform or the
approval of an ICO. The proposed framework is intended to be
pragmatic and applied to regulate the carrying on of business
related to VCs when falling out of scope of existing European Union
(EU) or Maltese financial services legislation.
A “Financial Instrument Test” will be applied to issuers and/or
persons offering ICOs conducted in or from Malta to determine
whether an ICO/VC is classified as a financial instrument in terms
of existing investment services legislation such as the Markets In
Financial Instruments Directive (MiFID).
This “Financial Instrument Test” will have two stages. The first
one will be to determine whether a particular VC falls under EU or
Maltese existing legislation. The second stage would then determine
whether the VC qualifies as an asset under the VC Bill. An
affirmative determination during the first stage would not require
the person undertaking the test to proceed to the second stage.
The prime minister of Malta, Joseph Muscat, and Silvio Schembri,
Junior Minister for Financial Services, Digital Economy &
Innovation within the Office of the Prime Minister, tweeted about
their enthusiasm, leadership and constant meetings with operators
within the DLT sphere wishing to move to Malta:
Towards more adoption
Ledger projects based in Malta have created LP 01, the first DLT
application in Malta consisting of a property transfer management
system to facilitate notarial work. This platform could be a useful
tool for authorities to access real-time data about sales of
property in Malta.
Also, E&S, which is a leading boutique law firm in Malta,
would offer services related to ICOs such as ICO set-up, legal
services or tokenomics. Several companies are already accepting
Bitcoin payments in Malta and there are Bitcoin ATMs present as
well. This illustrates a growing use of DLT in Maltese society.
The local press is also discussing DLT issues frequently as can
be seen in some recent articles from Times of Malta, Lovin Malta or Malta Independent.
The frictions among regulations, privacy protection and
innovation continue. However, while some countries choose not to
dialogue or embrace these breakthrough DLT innovations by updating
and improving their existing legislation, other countries such as
Malta have the courage and initiative to be pioneer leaders. Malta,
with the proposed legislation and Binance’s announcement to move
its headquarters there, is quickly positioning itself firmly to
truly become the “Blockchain island”.
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