Is The Blockchain Island Soon Becoming A Reality?

By Rishma Banerjee

Malta is on the verge of becoming the “Blockchain Island”, and it is no longer a distant dream but a close reality, which — within a short time frame and productive enterprise, can incorporate and use this new, emergent technology and propel the nation beyond the frontiers of the existing realms of blockchain; reaffirming Malta’s position as the primary point of reference for several other states, that will inevitably follow this precedence.

The latest announcements by the Malta Financial Services Authority (MFSA) and the Malta Digital Innovation Authority (MDIA) can be considered landmark especially for investors and operators who are looking forward to establishing their operational headquarters in Malta. It was a remarkable achievement for Malta when the MFSA approved the first Virtual Financial Assets (VFA) agents, later followed by the MDIA issuing the first accreditation of System Auditors of Innovative Technology Arrangements.

Both VFA agents and the system auditors have a significant responsibility as they act as the gatekeepers of this emergent industry, which the Malta Government estimates will be as significant as the video-gaming sector in a few years.
VFA agents are mainly responsible for undertaking preliminary applicants and conducting the Financial Instrument Test, which represents a two-tiered set of mandatory tests set forth under the Virtual Financial Assets Act that determines the regulatory regime to which a distributed ledger technology (DLT) asset is subject. The VFA Agents will ultimately submit this application to the MFSA on behalf of their clients for results.

Hence, VFAs will be the first line of defence and must encourage support from the MFSA both before and after the registration supervision process. This refers to the due diligence in the process in place that will improve the credibility of Malta as the ultimate jurisdiction of choice for operators that operate in this space.

The main interest in what Malta is offering for the flourishing blockchain industry was quite overwhelming, with the MFSA receiving over 350 notifications from major conglomerates that operate in this very sector. Having VFA agents identified, companies and operators in this space can now start undergoing the rigorous process for license acquisition.

The same goes for the system auditors accredited by the MDIA, who will carry out regular reviews on the technology in the system and will draw up reports based on the objectives as published by the MDIA.
Its main objectives are based on five fundamental principles: security, processing integrity, availability, confidentiality and protection of personal data.

Similar to the VFA agents duties, the system auditors will assist the MDIA throughout the certification process of the client’s Innovative Technological Arrangements and Services platforms, meaning that system auditors will be MDIA’s primary point of reference.

Besides having the first VFA agents and system auditors in place, there’s another landmark that cannot go unnoticed, and that is the bridging both authorities — i.e., the MFSA and the MDIA— which shall be issuing a license. Companies dealing in virtual currencies may need to engage a system auditor. These auditors act as the main bridges between the MFSA and the MDIA.

They are a vital component in the regulatory system that guarantees technological arrangements with necessary standards. Hence, the bridging of both authorities is fundamentally crucial to ensuring the best practices possible for market integrity, financial stability and consumer protection. The prevalent laws put into effect in November 2018 are providing legal certainty that operators in disruptive technologies are looking for.

From its commencement, we have set the tone that paving the way for the Blockchain Island will be done in such a way to safeguard the best interest of the nation’s jurisdiction. Thus, a lot of activity has been going on ever since the enactment of the laws, and both authorities worked synchronously to make the necessary preparations for the licensing process.
Malta a step away from being the first jurisdiction in the world to issue the license as mentioned above in a regulated environment that allows these businesses to flourish within a strongly unified technological ecosystem.

Malta has successfully positioned itself at the crux of this sector, and the latest milestone will instil not only trust but also certainty within the DLT atmosphere, simultaneously giving investors and consumers the necessary peace of mind and legislative recognition from the central European authority.

In conclusion, we can rightly state that Malta has yet again proved its commitment towards embracing newer improved technologies and being home to operators setting foot on Blockchain Island.