Malta — the ‘Blockchain Island’ or a Mirage?

Aug 16, 2018

On July 4, 2018 the Maltese Parliament has passed 3 bills into law rendering Malta the first country to set a regulatory framework for a cryptocurrency, ICOs and establishing a crypto-business.

What makes Malta a very interesting case for study is an emerging partnership between the Maltese Stock Exchange, Neufund and Binance. They aim to create the first, “regulated and decentralized, global stock exchange for listing and trading tokenized securities alongside crypto-assets.”

It is worth noting that it is the first time in history that security tokens can be offered and traded in a legally binding way.

Security token is a fully regulated “digital share” that gives a right to the company’s equity, assets or a part of its revenue.

STO — Security Token Offering is a middle ground between ICOs and IPOs, it allows investors to gain capital while remaining within the grip of the law. It also has the potential to approach more investors and at a lower cost than listing shares on a stock exchange, the practice also makes it more appealing and accessible to young investors.

Could Malta Be the Next Big Thing in Crypto Regulation?

There are a few limitations in the Maltese new regulatory stance towards the FinTech market that need to be accounted for.

First of all, before security tokens can be listed on exchanges, the digital trading ecosystem must mature to the level where exchanges are secure and liquid enough to handle approaching trading volumes.

Secondly, although, the partnership aims to make “the first decentralized” exchange, it is not explicitly explained what exactly will make it decentralized.

And finally, legal regulations in other countries also impose an issue. As long as the security tokens are listed on the Maltese Exchange, they are regulated, and thus, they are valuable. However, Maltese regulatory framework of the tokens need to be acknowledged in other countries and on other exchanges.

As Rudolf Medvedev, CEO of Ternion, notices, “Success and potential of the Maltese security tokens depend on whether or not other regulatory authorities and exchanges around the globe will officially recognize Maltese crypto regulations. Without such recognition the security tokens will be treated as simple ICO tokens.”

As we can see, Malta positions itself as the Blockchain island, however, it lacks to provide a comprehensive guide on how some of the objectives will be achieved, and the future of its regulations being recognized around the globe is uncertain. These two factors are essential in the future of Malta as the Blockchain hub.

Maltese regulation is in no doubt a huge advancement in the FinTech law sphere, but whether it is a stepping stone, or the final destination remains to be seen.