With Malta’s one-year transitory period for the blockchain sector having recently come to an end, Parliamentary Secretary for the Digital Economy, Financial Services and Innovation, Silvio Schembri, has praised Malta’s “regulated environment”, despite recent claims of slow activity in the sector.
“One has to bear in mind that we have come a long way, from a wild west scenario to regulation. Malta has managed to regulate the unregulated and we started by listening to the industry,” the Parliamentary Secretary said, in comments to The Malta Business Observer.
“As a Government, we took their concerns on board, embraced this new technology and discussions were held with the concerned authorities and stakeholders until we presented the current laws, which are serving as a blueprint for countries yet to explore this sector.”
Yet, major Indian crypto-exchange ZebPay left Malta in September 2019 – after just 11 months on the island – without having yet been licensed by the MFSA. Crypto-exchange CGEX also ceased operations in Malta shortly before ZebPay.
Neither company had a VFA service provider licence but were operating within a transitory period. A major concern for companies, it has been reported, was acquiring a bank account in Malta as cryptocurrency largely falls outside of the risk appetite of the island’s major banks.
This came off the back of legislation enacted on 1st November 2018, regulating Distributed Ledger Technology (DLT), and paving the way for operators in the space of innovative technologies, cryptocurrencies and Virtual Financial Assets (VFA).
As a result, the past 12 months saw an amplified level of excitement about Malta being the first country in the world to regulate DLT in such a robust way, with conferences and summits being well-attended and well-covered by the media.
Come 2019, the first VFA agents were certified, acting as a gateway between the MFSA and companies looking to apply to become service providers in the field. Moreover, under current legislation, VFA service providers have been allowed to benefit from a one-year transitory period – which closed on 31st October 2019 – during which they may operate without a licence, though they need to acquire one to continue operating.
However, the past few months have seen few firms acquire the necessary licences. To counter concerns, Mr Schembri underlined that “earlier this month 34 prospective VFA service providers, 21 of which pertain to crypto-asset exchanges, have put forward their Letter of Intent to the concerned authorities.”
Indeed, an MFSA spokesperson said that Letters of Intent are “the first step in the authorisation process for such applicants to obtain a VFA Services Licence under the Act. The Authority has already started setting up preliminary meetings with the prospective VFA service providers.
Once a preliminary meeting is held, each applicant will have 60 days to submit a full application pack to the MFSA, after which the MFSA will be able to start the authorisation process.”
And, echoing the Parliamentary Secretary’s thoughts, when asked about future prospects for the blockchain industry in Malta, the MFSA spokesperson said that “in the next year we foresee a good number of licensed VFA service providers operating in or from Malta, which, in itself, may well attract more service providers to seek a licence under the VFA regulatory framework.”
This article first appeared in the November edition of The Malta Business Observer.