‘Tragic’ for banks to ignore cryptocurrency future, says Malta DLT advocate

Should banks treat digital currencies as just another bubble? A conference on financial services technology has warned against ignoring the digital future  

The cryptocurrency Bitcoin and the Blockchain digital ledger technology system are “global and uncensorable”, a FinanceMalta audience heard today.

Steven Tendon, director of Chain Strategies, was reacting to criticism emanating from the European Central Bank about digital currencies. He  said Malta could soon be billed a “Blockchain island”.

The Malta Financial Services Authority’s director Christopher Buttigieg was referred to warnings by Andrea Enria of the European Banking Authority, who has argued completely against cryptocurrencies, for the lack of institutional back-up by a central bank and for lacking the traditional functions of money. “Enria said countries should keep financial institutions from entering the field,” Buttigieg said.

The MFSA has been working over the past nine months to set up a regulatory framework for initial coin offerings (ICOs), which attract investment for the acquisition of digital currency.

Tendon however said that while Bitcoin might currently be in a bubble, nobody could ignore the real value of cryptocurrencies.

Lawyer Max Ganado, who drafted the Malta Digital Innovation Authority Bill, said it was “tragic” that banks were being advised not to join this digital future. “If we do not engage with this technology, which is going to hit the world more and more, and use our best players here, we are going to prevent the best solutions in the industry to emerge,” Ganado said.

He said he didn’t agreed that traditional financial instruments should be segregated from the emerging cryptocurrency technology.

During the conference, Swiss lawyer Luka Muller-Studer acknowledged the risks of digital currencies, saying they needed a regulatory framework. But Tendon said it would be hard to regulated Bitcoin, which he called a “pseudo-anonymous” cryptocurrency, as opposed to some other cryptocurrencies which are truly anonymous. “We need to see which kind of cryptocurrencies can be approached by regulation, and what kind of regulation we want,” Tendon said.

Malta’s financial services sector has registered growth in investment services, insurance operations, retirement schemes, trusts, securitisations, new fund licences and financial institutions, with a year-on-year growth rate ranging from 5% to 17%. FinanceMalta chairman Kenneth Farrugia said Malta had seen over 570 new notifications from international firms passporting to Malta in 2017.

In a recorded message, Prime Minister Joseph Muscat said Malta had capitalised over the fast-changing pace of the financial services sector, bringing with it new challenges.

“We have to double our efforts to ensure a safe harbour and a reputable jurisdiction providing the highest standards of oversight. We have made progress by transposing the EU’s 4th anti-money launder directive and we will maintain dialogue with all stakeholders in this regard.

“In order to maintain economic growth, it is imperative for us to branch out into disruptive technologies and intelligent financing, with the intention to be leaders in this field.”

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