As a jurisdiction, we’ve looked at this industry in a holistic manner,” explains Parliamentary Secretary for Financial Services, Digital Economy and Innovation Silvio Schembri, who starts by giving a brief background of the legislative framework behind Malta’s Blockchain Island mission. “
“We’ve enacted three pieces of legislation – first, the set-up of the Malta Digital Innovation Authority (MDIA) which regulates the technology arrangements through the second Bill, the Innovative Technology Arrangements and Services (ITAS) Act; and finally, the Virtual Financial Assets Act, which is another piece of legislation which takes care of all activities in relation to cryptocurrencies, and which is regulated by the Malta Financial Services Authority (MFSA),” Mr Schembri begins.
“The first step involves what we call VFA Agents, who are the first gatekeepers of the applications. These agents review the application before submitting it formally to the MFSA for their review,” he maintains.
Another process follows, which, as Mr Schembri affirms, is the first of its kind in the world. “This process has to do with Systems Auditors, who are similar to regular auditors, but instead of auditing accounts, they audit systems, or technology arrangements,” he outlines, explaining that the auditors are tasked with getting into the nitty gritty of what the platform or technology arrangement actually offers, and whether it provides the necessary robustness. “These would be third parties – that is, not employees of the Authority, who would form part of a list of authorised and registered System Auditors,” he continues. And once an auditor certifies a system, the Authority can then proceed to issue a certification for that particular technology arrangement or platform.
“No other authority in the world can offer this,” Mr Schembri says. “It can actually work as a selling point – the certification gives peace of mind that what an operator is offering is backed by a central European authority.” And with these pieces of legislation coming into effect on 1st November 2018, the first set of VFA Agents have now been published by the MFSA, alongside the first set of Systems Auditors, published by the MDIA.
Much has happened since the first Delta Summit, Malta’s official blockchain and digital innovation conference, was held last October. “When we launched the Delta Summit, it was at a time when, as a jurisdiction, we were working on Distributed Ledger Technology (DLT), so the first edition focused on that. But DLT is not the end of our journey. In fact, when the DLT laws came into force in November, we also launched Malta.AI – a taskforce that is working on a strategy similar to what we have done on DLT. This is another area that would fall under the responsibility of the MDIA, so when we drafted the first piece of legislation, we also had Artificial Intelligence in mind,” he says, pointing to an ethics committee set-up which is included in the Bill, and which pertains to AI in particular.
Elucidating the Malta.AI Taskforce, Mr Schembri comments, “when it comes to blockchain, our target was to be the first country in the world to issue that legislation, and we succeeded. Now, we’re going to expand that strategy to AI – the target here is to be one of the first 10 nations in the world to have a national AI strategy, yet not just in terms of a strategic vision document, but also pertaining to specific legislative, HR and supportive measures. It will be a concrete document with measures that we can implement.”
The second edition of the Delta Summit which will be held later this year, Mr Schembri elaborates, will include several new areas that are being worked on. “The plan is to launch the official AI strategy, as well as focus on blockchain and DLT, at a time in which the first licences would have already been issued, but there are other new areas too,” he maintains, pointing to a new strategy relating to the video gaming industry and Esports which Cabinet recently approved.
Speaking of Esports in particular, for which Malta is already home to 15 operators that employ 200 employees, Mr Schembri says, “this is a new industry which I personally really believe in. In economic terms, it could benefit the country, and it is a new industry which can attract youths within this thriving economy.”
Esports is central to Malta’ vision on developing its digital economy, and efforts are also underway to help attract international Esports tournaments to Malta. For this purpose, a Memorandum of Understanding was also recently signed between the world’s oldest and largest Esports company, ESL, and Government through the GamingMalta Foundation. The MOU will serve as an intent for both parties to develop a multiyear programme to help the development of the local grassroot Esports ecosystem, the organisation of local and international events, as well as the sharing of expertise in the sector.
Progress, however, isn’t without its challenges, and human capital and skills in the sector remain an issue that needs to be addressed within these rapidly developing sectors. “Given that this is a whole ecosystem, it doesn’t just have to do with ICT professionals – we also need lawyers and engineers specialising in IT, for example. So, together with the staff at the University of Malta, we have reviewed the courses being offered, and looked at how we can include modules related to these emerging industries in different courses,” he explains.
Moreover, the first degree courses relating to DLT have also recently been launched, starting last year. “We’ve also launched a new scholarship programme for students at Masters and PhD level who would like focus their studies and research on DLT, so as to encourage more students to go into this area. This has already been a huge success, with 19 students having recently been awarded a scholarship grant to pursue their studies at a Masters level in blockchain and DLT,” he adds.
This interview first appeared in the June edition of Blockchain Island.