Malta Financial Services Agency (MFSA) has issued its Discussion Paper on Initial Coin Offerings, Virtual Currencies and related Service Providers, “to present to the industry a proposed policy to be adopted by the MFSA for the regulation of the ICOs, [cryptocurrencies] and service providers involved in ICO and/or other VC activity.” It’s a welcome sign for the country’s bitcoiners after its oldest bank effectively banned all bitcoin transactions. Clearly there is a tension between Malta’s legacy financial sector and, perhaps ironically, a government eager to help usher in a new financial future.
Malta and its Crypto Identity Problem
MSFA is the country’s main financial regulator, and it appears to be seeking guidance on how to proceed with financial innovations, be they initial coin offerings (ICOs), cryptocurrencies (referred to as virtual currency or VC), and blockchain technology. It’s a rare chance for a nascent industry to have a say in regulating itself.
The stated aim of the MSFA paper is “to devise a policy framework that supports the innovation and new technologies for financial services in the area of VCs,” it declares, noting it is keeping an eye on “ensuring effective investor protection, financial market integrity and financial stability.”
The Republic of Malta is a picturesque Mediterranean archipelago just south of Italy, home to under half a million citizens. It’s the smallest nation in the European Union.
“The consultation is open from 30 November 2017 until the 11 January 2018,” the MFSA announcement concluded.
This is a sea change from the regulator, as just this summer it warned against cryptocurrencies. Reacting to the first crypto ATM in the country, it stated: “Unlike traditional money, acceptance of payment in virtual currency depends entirely on the voluntary consent of the recipient. Furthermore providers of services in relation to virtual currencies are currently neither regulated by law nor authorised by the MFSA,” Times of Malta reported at the time. “You should not keep large amounts of money in [bitcoin] and ensure you keep it safe and secure,” the agency said.
Bank of Valletta Snubs Bitcoiners
This week the country’s oldest bank, Bank of Valletta (BOV), halted all cryptocurrency transactions. “A bank representative I spoke to was very friendly but unable to give me any more information,” a customer complained. “They just said they were informed that the bank’s policy had changed.”
BOV even went so far as to reverse SEPA transactions. Times of Malta reported an official spokesperson as saying its prohibition has to do with “risk appetite, regulatory directions and the exigencies of its correspondent banking network.”
Curiouser still is how the government seems to be reassuring local bitcoiners that blockades are just a phase. Its parliamentary secretary, Silvio Schembri said such blocks and banks are “short term,” and as such should be eased once official policy is in place.
If that wasn’t enough, Malta’s Prime Minister, Joseph Muscat, earlier in the year spoke glowingly of bitcoin, saying in effect Europe should evolve into a “bitcoin continent.” His administration was a first to develop and approve a blockchain program as well. The Office of the Prime Minister has also stated it wants to issue a mock cryptocurrency test as a way to evaluate regulations going forward.
“Somewhat ironically, the government’s 25 per cent share in BOV makes it the bank’s largest shareholder,” the Times noted.