CC CASE STUDY
On the road to making Malta a technological hub Martina Said speaks to Silvio Schembri, Parliamentary Secretary for Financial Services, Digital Economy and Innovation, to find out about Government’s plans for the coming year in the fast-track field of technology.
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arlier this year, during a conference in Dubai, Parliamentary Secretary for Financial Services, Digital Economy and Innovation Silvio Schembri announced that a legal framework to regulate services in Blockchain and virtual currencies will soon be launched, which will eventually be expanded to include the sectors of artificial intelligence and Internet of Things (IOT) devices, making Malta the first country in the world to do so. ‘Blockchain’, ‘Cryptocurrencies’, ‘Bitcoin’ and ‘virtual currencies’ are but a few terms that repeatedly made headlines in local and international news of late, at the same time that virtual currencies, such as Bitcoin, were taking the investment world by storm. Mr Schembri agrees that virtual currencies have indeed flooded the market in recent years, and asserts that while this space is constantly evolving, and being monitored closely, one thing is for sure: “Whether one likes it or not, it is very difficult to imagine a future without cryptocurrencies. In whatever shape or form, they are here to stay.” “Different virtual currencies come with slightly varying features, but the majority of them exhibit, fully or partially, one of three characteristics: a means of payment, a store of value, or a utility value,” he explains. “Even if, in theory, they have all three properties, in practice, one property tends to dominate over the others. For example, in the case of Bitcoin, it is rarely used for exchange purposes – mostly because of its volatility, but instead viewed as an asset.” Virtual money can be defined as a digital representation of value that is issued and controlled by its developers, and used and accepted among the members of a specific community. Unlike regular money, it relies on a system of trust and is not issued by a central bank or other banking authority. Bitcoin, for instance, uses peer-to-peer technology, and the processing and spending of bitcoins happens collectively through a network. Every payment gets encrypted by a unique secret key and is sent from one address to another over the blockchain, which is a decentralised public register that tracks everyone’s bitcoins. This system bypasses the need to involve an intermediary, like a bank, for the transfer of ‘money’. The surge in interest in cryptocurrencies has also raised eyebrows about its lack of regulation. Mr Schembri asserts, however, that cryptocurrencies are not the first attempt to create digital currencies. “Prior to the emergence of cryptocurrencies, 56
“When we say that Malta will be the first country to regulate the outcomes of blockchain, we mean that we intend to create a transparent and robust legislative framework that will facilitate innovation while at the same time tick all the boxes in terms of compliance.” attempts were made to create digital cash but none of them were successful, mainly because they were based on a centralised system. Bitcoin, the first cryptocurrency, was developed as a completely decentralised currency, where transactions are an open source, controlled by a code, and that relies purely on a network. No third party can affect the currency, which may explain why cryptocurrencies have surged despite the lack of regulation.” What Government is aiming to do is not regulate the technology as such, but
rather give certainty to the whole space, the Parliamentary Secretary adds. “When we say that Malta will be the first country to regulate the outcomes of blockchain, we mean that we intend to create a transparent and robust legislative framework that will facilitate innovation while at the same time tick all the boxes in terms of compliance, such as consumer protection and Know Your Customer (KYC). The Malta Financial Services Authority (MFSA) will deal with the regulation of cryptocurrency and other related services under a new Act. However, FEBRUARY/MARCH 2018