Six months into its establishment, the Malta Digital Innovation Authority (MDIA) – which was set up after the Malta Digital Innovation Authority Bill was approved by Parliament last year – is on a path to place Malta on the map as a centre of excellence for technological innovation, promoting its use and facilitating its advancement in the process, and setting standards and guidelines for the industry.
Since taking on the role as CEO of the newly-established MDIA – the role of which is to certify Innovative Technology Arrangements (ITAs), and to accredit system auditors and technical administrators while promoting technology innovation – Stephen McCarthy says that one of the most exciting developments in this sphere is actually quite a simple one: that Distributed Ledger Technology (DLT), one of which is blockchain, is gaining wider acceptance.
“When I initially started seven months ago, both locally and while attending conferences abroad, the atmosphere was different to now – blockchain wasn’t being widely embraced, the reason being that many still confused blockchain with cryptocurrency. However, things have changed,” says Mr McCarthy. “No one is disputing the benefits of blockchain anymore, and it is being embraced by all. This is possibly one of the most important developments we’ve noticed recently.”
Its widespread acceptance and use can be seen through the various companies, hailing from many different sectors, that have adopted it, including banks. Recently, HSBC Malta announced that HSBC Group is already using blockchain technology and actively testing applications with customers in areas such as trade finance and foreign exchange.
“Banks that have adopted this technology for their operations have their own private blockchain for trade payments and international trade finance. They are satisfied with it and are focusing to improve it and widen its use in the realm of international trade finance. This is extremely encouraging, especially as banks tend to err on the side of caution. Banks also appear to be open to companies using blockchain to work with the bank. Again, it’s crucial to emphasise that we are not referring to companies that use cryptocurrencies, but rather companies that operate in non-financial sectors.”
Following the approval of the three Acts by Parliament last year – the Innovative Technology Arrangements and Services (ITAS) Act, the Virtual Financial Assets (VFA) Act and the MDIA Act – I ask Mr McCarthy what impact these have had since they came into force. “I must immediately point out that the major impact of the three laws approved by Parliament has been in the FinTech and cryptocurrency areas, with respect to Virtual Financial Assets, which fall under the remit of the MFSA,” he asserts. “Approximately 183 notifications were received by the MFSA so far for services, which include exchanges, custodians, ICOs and wallets. The MFSA is, for the time being, accepting notifications which show a company’s interest to apply for a licence. There were also around 37 Virtual Financial Asset applications.”
Moving on to another sphere of innovative technology, the CEO is confident that just as 2018 was the year for blockchain in Malta, 2019 will be the year for Artificial Intelligence (AI), which the MDIA will also be responsible for as another form of innovative technology beyond DLT.
“We have launched a consultation paper regarding Malta’s AI strategy, and Government set up a task force, headed by the Chief Technical Officer of the MDIA, Wayne Grixti, to oversee the consultation process. We are using the same system for AI that we used for blockchain, in that we reached out to and consulted with operators and professionals in the industry, and issued a draft strategic plan thereafter. This October, once the consultation phase is over, we will be able to draft a formal strategy for AI.”
Talk of growth across all of many services sectors has raised concerns among many locally that Malta may become a victim of its own success, as it struggles to maintain an infrastructure adequate for a growing population, as well as sophisticated industries such as these. Mr McCarthy asserts that Malta’s economic growth has been possible through diversification, namely the introduction of blockchain and AI.
“Such diversification is reaping fruit in that there is good economic growth. This growth, however, which occurred in a short amount of time, will have its short-term pains, such as a great demand for housing, where, given the way price mechanisms and economics work, if there’s a greater demand than the initial supply, there will be an increase in rental prices and housing costs as we’re seeing now. However, I consider this to be a so-called necessary evil for the short term,” says Mr McCarthy. “In the medium term, it will stabilise. In the case of construction, we know that requests for permits have tripled in the last year, and the effect of this increase will be felt in the coming year, but then stabilise after that.”
Through economic growth and the prosperity that companies which moved to Malta have brought with them, the CEO says that certain infrastructural projects, such as the improvement of our roads, have become possible. “We can say that we now have the money to invest in the €700 million project to change all of Malta’s roads in seven years. Of course, building roads brings its own hindrances and nuisances, it is a short-term pain, and in the medium term, we all stand to benefit.”
This interview initially appeared in the June edition of Blockchain Island