Malta. Blockchain island. A stamp-sized nation nestled in the Mediterranean famous for its rocky coasts, baroque cathedrals, megalithic temples and centuries of culture. It is a real mix of ungrateful British whites, luxurious hotels, exotic women, cars that drive left and a host of other legacies left by the various civilizations that have invaded the rock over the years.
In more recent times, however, Malta has become famous for over its rich heritage. It has become a welcoming home for the iGaming industry (a booming industry valued at around $ 1.4 billion – 12% of Malta's GDP).
Facing a long European crisis and deficits year after year, Malta was finally able to record a surplus of 182 million euros for 2017, the second consecutive year.
And the country is discussed in the regulatory circles of the blockchain for its progressive position on the cryptocurrency, even on the rebranding as "The Blockchain Island".
His government is open-minded and its Prime Minister, Joseph Muscat, gave a compelling speech to the UN on how countries should work together to solve the problems of the world.
However, Malta has some problems on its own – and a not-so-perfect past when it comes to some very sticky matters, money laundering between them.
Malta the Blockchain island
On the surface, Malta appears to be a pioneer in the cryptocurrency regulation space. On July 4, 2018, it became the first and only country to officially pass three new crypto laws into law.
This established a regulatory framework for cryptocurrencies, blockchains and DLT in general. 2018 was also the first year in which the country held its long-awaited summit on Malta's Blockchain.
Asked about the meaning of this for Malta and the crypto community in general, Steve Tendon, blockchain strategist and member of Malta's National Blockchain Task Force, said:
"It will be the first ever event in which the intention of Malta to recognize" legal personality "to innovative technological devices (such as DAOs) will be presented to a large international audience.This is an innovation in legislation that will support innovation as no other law has ever done ".
Malta has not just approved three laws in which titles tend to focus, they have a whole Blockchain national strategy written by Tendon, with six pillars showing a deep understanding of technology and where it is going. It covers initiatives such as moving public registers to blockchain, e-residency and digital identity and smart governance.
"This will undoubtedly appeal to all developers and entrepreneurs working on decentralized technologies of all kinds, such as the new generation of blockchains, decentralized exchanges, decentralized ICO platforms, decentralized banking services, and so on."
You can clearly see that this is only the beginning. Malta is not just about guiding the way in the regulation of ICOs, but it shows governments the need to understand rather than fear technology. At the same time, the country is positioning itself as an open space for business in the middle of a sea of locked doors.
Attract the main cryptographic companies
This forward-looking regulatory approach has already inspired an influx of blockchain companies on its shores, particularly Binance and a litany of other cryptic exchanges.
It's not that Malta is easy with cryptographic companies – according to Tendon, its KYC requirements are among the most difficult – but at least they provide companies with a stable environment in which to operate, in which their business is not at risk of having been closed by one day at the other, their token declared a security, or their government known for its hostility to the crypt.
Malta's progress is undeniable. I was recently at the Summit that attracted around 8,500 delegates. The place was full of joints and the sky was high.
Muscat gave a speech. Sophia the robot was there, even John McAfee has delivered a keynote that praises the position of Malta … and therefore virtually concluded that the governments had no place to regulate cryptography.
But it is one thing to lay the foundations for a new future. And another if you're still trying to hide your past.
The problem of money laundering and the lack of crypto banks
There is certainly positive rhetoric, a lively atmosphere, real legislation and the promise that Malta will see cryptocurrency banks in 2019. But legacy banks are not yet coming around. Their standards are higher, along with the fear of being slapped with a huge fine to be too relaxed in their AML policies. Ask Deutsche Bank if you want a confirmation.
While Binance is working on the first decentralized bank in the world, the encrypted companies may have to wait a little longer. And if they think that Malta is their meal ticket for a safe haven, they might also need to dig a little deeper.
Malta has a history of working with undesirable individuals. It seems that beyond the game, innovation and technology, the name of the country is somehow synonymous with money laundering.
Malta was mentioned in several cases, including that of Matthias Krull, a German banker who worked for the Swiss private bank Julius Baer, who admitted to launder money for "Los Chamos", which was thought to be connected to the Venezuelan president Nicolas Maduro.
There is also the tragic murder of the Maltese journalist Daphne Caruana Galicia who, before dying, accused the Pilatus Bank of Malta of money laundering. This has pushed Malta into the global spotlight on freedom and security of the press and the Banca Pilatus under the microscope of the European Central Bank (ECB).
Caruana Galicia had also accused the bank of making suspicious payments to prominent figures of the Maltese and Azerbaijan. The bank had its accounts frozen in March and was eventually closed by the Maltese FSA during the year.
Then there's the problem that the EU is currently furious with Malta for the last public error of Muscat. According to Bloomberg:
"The union's least populated member nation has become a cryptocurrency and the online gaming center plagued by corruption and money laundering charges, and it is selling passports."
While the country was at the top after announcing its second year of profit, Muscat announced that the government would donate 5 million euros to a charity organization for cancer. This turned out to be a move accepted by no one after it emerged that the donation would be derived from a fund that sold Maltese passports to foreigners for 650,000 euros the one.
Once again, the whole delicate subject of Malta's tenuous relations with undesirable individuals has raised its ugly head, defining the practices of Maltese AML in doubt and reigniting the flame on the aforementioned themes.
So Malta, Blockchain Island, is more than just advertising?
Clearly, Malta's presence in the global money laundering phase is quite large and potentially worrying.
Some governments, according to Bloomberg, even claim that Malta could put:
"A serious threat to global efforts to track money laundering, enforce economic sanctions and maintain fair transnational standards".
There is also the fact that many banks will not yet work with cryptographic companies and some companies may not want to join Malta and its approximate past (or should we say this?).
But then again, the progress made can not be denied. Malta's new regulatory authority, the Malta Digital Innovation Authority, is much more than blockchain or Bitcoin. It is about innovation itself and other emerging technologies, positioning the country as advanced and open to a world of possibilities.
Blockchain punches all over for failing to attract the masses, not being easy enough to use and being unregulated and dangerous. So it is encouraging to see countries plunging deep, showing deep understanding and welcoming crypts on its shores, even if it is a little indulgent with those doing business.
Disclaimer: the opinions expressed in the article are exclusively those of the author and do not represent those of, or should be attributed to, CCN.
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