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Malta aspiring to be at the forefront in regulating blockchain

Publication Date: Oct 24, 2017
Malta is aspiring to be at the forefront in regulating the blockchain sector so that it can repeat its success in the gaming sector. 

In a press conference at MITA’s Data Centre, Honourable Parliamentary Secretary Dr Silvio Schembri explained that in the budget for the coming year, Government will be providing all the tools necessary for economic growth, while encouraging the use of new technologies. Dr Schembri said that the digital world is very dynamic, hence Government is trying to anticipate what changes will occur so that the country is prepared for the future. These changes will not only affect citizens’ lives, but also the way businesses work. Among these changes, there is the development of the blockchain technology, which will change radically how transactions are made. Many sectors will be affected by this change and Malta wants to invest in such a technology. 

For this reason, the Parliamentary Secretary said that Government is working on a plan how to implement a national strategy about blockchain technology, through the work of a taskforce that has been setup on purpose. However, in the meantime it is already implementing two measures which will complement the implementation of this strategy. 

The first initiative is to establish a National Blockchain Laboratory at MITA, where the agency can develop its skills and specialise in this technology. MITA’s employees will be upskilled, to become experts in this sector and exploit the advantages it offers. It is Government’s wish to have MITA employees that have expertise in blockchain and who can facilitate the use of this technology on existent IT systems in Government and public entities. This will eventually lead to the enhancement of e-Government services to make them more efficient and transparent through smart contracts. As in previous projects regarding IT applications, Government will once again work with the private sector to develop new applications using blockchain technology.

MITA’s employees within the Blockchain Laboratory will also be involved in Research and Development to ensure that the agency is at the forefront in analysing the developments occurring in this sector and explore ways in which it can adopted in several IT sectors. MITA’s employees working within this laboratory will also be training other public-sector employees on how to use blockchain technology. This will enable experts from the public sector to learn about the advantages of this new technology and then develop their own solutions to increase efficiency in several processes and services offered by the public sector. 

Government will also be creating a Blockchain Hub, after many individuals and companies have shown their interest in developing new services in the blockchain technology sector. Government would like to encourage the start-ups in this sector, by providing them with 250 metres squared of space where they can operate from. Dr Schembri said that the Hub should operate on the same lines as the MITA Innovation Hub, which has proved to be a successful story for start-ups. The hub will provide an incentive to start-up companies, who would like to invest in such technologies and would need help in their initial phase. 

Through this measure, Government intends to attract new start-ups so that it can strengthen the ecosystem to become a blockchain island. Dr Schembri said that a recent study has revealed that Malta’s digital business ecosystem has a value of €770 million. Through this vision, more start-ups can be attracted to choose our country as the place from where to operate. 

Parliamentary Secretary Silvio Schembri also explained that during last week he visited the three companies Acronis, Runa Capital and Parallels which will be helping start-ups in their projects. Dr Schembri explained that these three companies have already invested €10 million when they decided to come to Malta, but at the same time they are willing to offer between €500,000 and €10 million over a span of three years for such projects that sustain research in our country. It is interesting that these companies decided to start operating from Malta because they want to contribute to our country’s vision to become The Blockchain Island and increase innovation. 

Dr Silvio Schembri also referred to financial services and explained that in the last months Government has started a public consultation process so that the Malta Financial Services Authority can update itself to the new digital challenges u make the necessary changes to facilitate the use of tools such as FinTech, Regtech, Blockchain and cryptocurrencies. 

The Parliamentary Secretary said that the MFSA will be publishing a consultation document on rules about investment schemes in cryptocurrencies, together with a study about regulation for those who offer investment services through virtual currencies. In this regard, Government will also be launching a taskforce that attracts Fintech and Regtech companies. 

While referring to the Global Competitivity Report 2017-2018 published by the World Economic Forum, Dr Schembri said that Malta placed among the best jurisdictions of the world for financial services, because it distinguished itself in auditing and reports and because of the robust banking sector. This, together with another report published by MFSA about the financial services’ contribution to economy, continue to confirm the positive trend in this sector where there has been a substantial growth in financial and insurance activities. 
The Gross Value Added from the financial services continued to grow in the last five years, such that it amounted to €598 million in 2016. At the same time, this sector managed to attract a lot of investment from foreign countries and provided more employment. In fact, today there are more than 10,000 people working in this pillar of our country’s economy. Growth was mostly recorded in the insurance and pensions sector where in September there were 51 schemes being offered. In this sector, Government has developed an important legislation which makes it easier for companies to relocate to Malta. 

Dr Silvio Schembri also revealed that there are 10 companies who are willing to relocate their insurance business to Malta. In fact, he explained that the regulator has already received five applications and is expecting the next five applications in the coming weeks. 

To make up for such an increase in insurance companies, Government needs more graduates in insurances and pension schemes. For this reason, it will invest together with the Education division to start a training programme with MFSA for University and post-graduate students. More students will be given the opportunity to work in the financial sector and encourage them to specialise in financial services.