The Blockchain Island – yet another case of jurisdictional innovation
2018 will be remembered as the year Malta was dubbed ‘The Blockchain Island.’ On November 1st 2018, three Bills of law establishing the blockchain and cryptocurrency sector in Malta become effective. After months of consultation and tweaking, the Bills are amongst the most holistic sets of legislation that any jurisdiction has put forward in the field of virtual financial assets.
We caught up with JP Fabri, Director at ARQ Group who leads the economic advisory and digital economy arms of the Group. Fabri focuses on the economic effects of regulated industries and argues that Malta’s economic success. Commenting on the status of ‘The Blockchain Island,’ Fabri said that “this is yet another prime example of Malta’s capacity to use its jurisdiction in order to carve out niche economic sectors. If we just look around at the current economic pillars that sustain our economy, and which include financial services and remote gaming, one would easily appreciate the power of regulatory vision and legislative frameworks that Maltese legislators have had in the past. Our present economic success is also built on the strong foundations that these sectors were built upon.”
As one can expect, having a vision and a strategy is key to building any ecosystem. In this respect, one must say that the Maltese Government had a very clear vision to establish Malta as the Blockchain Island and the setting up a task force, the publication of the National Blockchain Strategy and the enactment of these Bills are a strong testimony to this vision. Fabri said that “this vision needs to now permeate into the different levels of government and civil service. We truly need a new era of governance and governing, one which is truly smart and digital. The blockchain offers some unique opportunities for efficiency-gains and cost-reduction and Government needs to now focus on revamping the civil service and ensure that it truly becomes a smart government. A lot of strides have been made in this regard, however there is need for a culture change within government and civil service to truly embrace this new digital era.
Commenting on the regulatory framework, Fabri emphasised that it is also key to the deepening of any ecosystem. In this case, the regulatory element does not stop with the legislative acts. “It is now crucial for the regulators involved, which include the newly set-up Malta Digital Innovation Authority, the MFSA and the MGA to deliver an efficient and quality-driven level of service to the industry. To this end, they require the resources and capacity to do so. Regulators must also foster an open dialogue with service providers and operators to ensure that feedback loops are present in the system,” he added. Fabri said that Malta has always shown to be proactive in this consultation and legislation renewal with him citing the Malta Gaming Authority as an example of consultative and proactive approach to regulation.
The service providers also play a key role in developing the ecosystem. As a service provider himself, Fabri commented that the industry of professional advisors and VFA Agents will be the main touch point that foreign investors will face. He added that, “we are the prime ambassadors of the jurisdiction and the responsibility is huge. It is therefore imperative that service providers respect not only the clients but also the jurisdiction itself and we must remain knowledgeable and always give professional advice.”
This brings us to another main determinant of the successful development of the ecosystem, education and human resources. Commenting on this, Fabri said that, “as Malta’s labor market remains buoyant, human resources are probably one of the most pressing challenges that the economy is and will continue facing in the foreseeable future. In a sector which is knowledge-intensive, skilled and trained human resources are essential for its future. Our educational institutions become critical in this. The University of Malta is taking a lead in this however more efforts need to be taken to ensure that this sector and others will be adequately resourced in the years to come. Initiatives that were approved by the Government earlier this year to bring over more third country nationals are also necessary to sustain Malta’s economy. However, this is not without its own challenges and a holistic plan for human resources and integration of foreign workers is needed.”
Fabri commented that the banking sector is currently Malta’s Achilles heel. “Ecosystems also require support structures to operate effectively. In this case, the Blockchain Island requires an effective and supportive banking structure which unfortunately is missing as yet.”
In conclusion, Fabri said that an ecosystem does not only depend only on a regulatory framework, albeit it is central to its sustainability. The Blockchain Island requires further initiatives to truly materialise and this will continue being work-in-progress. Fabri said that, “Malta has already emerged as a pioneer in this fast-growing industry. It is now the responsibility of all stakeholders, public and private, to ensure that we truly live to the expectation of becoming the Blockchain Island.”