While 2018 saw the coming into force of three pieces of legislation regulating cryptocurrency, blockchain and innovative technology, together with many high-profile conferences, questions have turned to how the industry will develop and what the next disruptions will be.
Managing Director of Blockchain Advisory, Jonathan Galea, believes that the hype surrounding blockchain technology is being strengthened. Dr Galea says the cryptocurrency market crash in 2018 has, in fact, “helped flush out those who were only looking to earn a quick buck rather than focus on the longevity of any meaningful ventures in the space.”
Despite this, Dr Galea shares his thoughts on how “the killer application of blockchain still remains cryptocurrencies.” He explains, “let’s keep in mind that cryptocurrencies serve as the bread and butter of public distributed ledgers, especially since they serve as an incentive for the support thereof. The next big disruption will occur when a successful link between all such different blockchains emerges, allowing for the cross communication and token/data transfer across such different blockchains. Right now, we are in the Intranet phase – we’re waiting for the Internet.”
Jonathan Galea, Managing Director at Blockchain Advisory
Senior Partner at Ganado Advocates, Max Ganado, takes a different stand. He believes we are currently experiencing a quiet period in this sector because experts are working on developing the technology for different use cases. “As I understand, it takes an average of two years to launch a blockchain platform, and it may cost as much as €2 million, so this is not an industry that is going to emerge very quickly.”
Traditional banks have so far taken a cautious approach to the developments surrounding blockchain technology, preferring to wait and see what the next technological developments will be. The captivating aspect of Distributed Ledger Technology (DLT) is how it removes the need for an intermediary by being transparent and immutable.
On the role of banks, Dr Ganado predicts that 2019 will see “banks and investment firms, who were reacting to the threat of disintermediation, taking initiatives to overcome that very real threat as early as possible.” He adds, “whether taking certain initiatives will re-establish trust in the intermediaries has to be seen as technology is after all just a tool. The players remain the same.”
Kenneth Farrugia, Finance Malta Chairman
Finance Malta Chairman, Kenneth Farrugia, speaks of the importance of positioning Malta at the forefront of technological innovation, so that it may be able to foster growth and operational efficiency across a wide number of sectors.
“The legal framework Malta put in place is not just significant in the local context but has garnered much interest in the international sphere. We put together a very comprehensive framework with three key acts: the Malta Digital Innovation Authority (MDIA) Act, the Innovative Technology Arrangements and Services Act (ITASA) and the Virtual Financial Asset (VFA) Act.”
The MDIA acts as a communicator between key national bodies such as the Malta Financial Services Authority (MFSA), other relevant Government regulators such as the Malta Gaming Authority (MGA) and operators. It also regulates new and emerging technologies. The ITASA is geared towards regulating technology service providers, while the VFA Act regulates Virtual Financial Assets.
“Having this ‘trialogue’ in place, as I like to call it, in terms of the Government, the regulator and industry, has worked very well in defining and articulating these laws and regulations. The attraction, as previously said, was not just local – the key interest was predominantly driven by international operators,” Mr Farrugia continues.
Asked what intrigues him most about the developments surrounding the blockchain industry, Mr Farrugia asserts it is how the technology’s flexibility “allows it to be amenable to a number of sectors because it induces a new customer experience and improves operational efficiency.”
On an international level, Dr Galea speaks of the “curious shift” from Initial Coin Offerings (ICOs) to Initial Exchange Offerings (IEOs). “Through this mechanism, token issuers leverage the network and reputation of existing cryptocurrency exchanges to offer their tokens to the public at large, or rather, the users of such exchanges. It has given a new lease of life to projects looking to raise funds without going through traditional funding mechanisms, and has potentially stalled the onset of Security Token Offerings which, although belong to a completely different regime, have been assimilated by some to the takeover of ICOs.”
Max Ganado, Senior Partner at Ganado Advocates
Dr Ganado, on the other hand, says his interest lies in “those developments which enhance implementation of monitoring and flagging bad behaviours in the way we deal with things in our societies, our service industry and also in public administration.” Should technology manage to keep “things on the right track, it’s a good solution to the serious problems we evidently have in managing challenges in respecting the law,” he says.
“Since technology – well-programmed technology – cannot be threatened, bribed or fooled and it cannot be lazy or decide not to observe the law, we will make great steps forward. We need to introduce the kind of technology called REGTECH (Regulatory Technology) into our systems and quickly. It would also be very good if we can support innovation in the development of such software. So, I am keenly interested in the recent decision by the MFSA to use new technology to monitor compliance aspects of the blockchain services industry,” he asserts.
“I am also a keen follower of developments in identity management systems which protect our identity and allow us to manage it ourselves. It seems one of the biggest problems facing the world’s populations is identity theft – people pretending to be you and stealing money using your name – and this is rampant due to the internet, the failures resulting from anonymity, and failures to develop tools to combat abuse in cyberspace.”
This is an excerpt of the cover story which featured in the June edition of Blockchain Island.