After branding itself as 'blockchain island' earlier this year, Malta is determined to live up to its name. With the establishment of the Malta Digital Innovation Authority (MDIA) last month and with two major bills related to Digital Ledger Technology and cryptocurrencies coming into affect this past Thursday (November 1), the European island country has a regulatory framework few other jurisdictions can boast.
Stephen McCarthy first heard about blockchain only a year ago and has held his job as the first chief executive of the MDIA for just over three months. However, the pace of progress in the ecosystem means there has been no lack of changes even during his short time in the field, which in his opinion have been largely positive.
Stephen McCarthy of Malta.. Courtesy
"I'm already witnessing a change in attitude from third parties. From a 'don't-know' and a bit of a skeptical attitude, I'm seeing a shift of getting on board with this new technology," McCarthy recently told BLOCKTV. "That is extremely positive and we are also getting a lot of feedback from a lot of interested third parties from around the world inquiring what we are doing and how we are doing it. We are being active in explaining what we are doing because we feel that in order to create a world wide ecosystem it doesn't work if only Malta goes down this road. In order for the full benefit to materialize, other countries must join in with their own rules and requirements and procedures. No one is going to say that they should adopt ours, but the way forward is to accept blockchain and embrace the advantages that this technology has."
"We truly believe in blockchain and we are doing this to safeguard its existence." - Stephen McCarthy, the CEO of the Malta Digital Innovation Authority.
McCarthy recognizes that many eyes in the blockchain sphere are on Malta following the passing of its two new bills: The Innovative and Technology Arrangements and Services Act (ITASA) and the Virtual Financial Assets Act (VFA). He hopes they will bring regulatory certainty and attract businesses looking for access to a major market, with Malta being part of the European Union since 2004.
The ITASA specifically addresses the registration and certification of crypto businesses, particularly exchanges and trading platforms that handle cryptocurrency. Two of the world’s largest cryptocurrency exchanges - Binance and OKEx - had already previously announced their plans to relocate to Malta. They also both signed an agreement with the Malta Stock Exchange for the launch of a security trading platform.
The VFA will regulate Initial Coin Offerings, with McCarthy believing Malta has established all the safeguards to reduce scamming and fraud as much as possible. "The mindset has to be totally different to the traditional mindset. This technology has a different governance structure," he explained. "We accept that we are the first and doing something no one else is doing. We are cautions of that fact and that is why we are entering into this with an open flexible mindset. But I want to point out that blockchain is such an interesting and exciting way forward. There are so many benefits that could be taken from this new technology so we are excited to do it."
He accepts that Malta is taking a calculated risk, but was keen to emphasize time and again that "blockchain is not equal to cryptocurrency."
"ICOs and crypto use blockchain in order to do their operations but believe me there are numerous other industries and business opportunities that we cannot in my opinion miss," he noted.
McCarthy believes the Maltese authorities will be ready to begin to accept applications around January 2019, and that it will only take several weeks for an application to be approved or rejected.
"The focus here in Malta is not to do it quickly, but to do it properly," he said. "There is a due diligence process which has to be followed and many other requirements that have to be followed. It is a matter of doing it right."
Malta's prime minister, Joseph Muscat. (Getty)
McCarthy hailed Malta's prime minister, Joseph Muscat, as the inspiration behind the island's embrace of DLT. Muscat used his platform at the general debate of the 73rd Session of the General Assembly of the U.N. on September 27 to speak out on the potential of blockchain and crypto.
"When it comes to blockchain and DLT he is the prime leader. He truly believes in it," explained McCarthy. "He sees the potential of blockchain in many areas, including health, education, ID cards and land registry."
McCarthy explained that while the MDIA focuses on blockchain, the regulatory regime on ICOs is under the Malta Financial Services Authority.
"We feel that the leading authority with the experience and competence in that area is the Malta Financial Services Authority," he said. "We will support MFSA. In the case of an ICO we have issued guidelines and procedures for our system auditors who will be accredited with MDIA. We know that in the case of ICOs and even exchanges there is a bigger element of risk. We are trying as much as possible to make the use of this technology as safe as possible. Nothing is 100 percent safe, but we would like to have the most robust, transparent and accountable system."