Maltese Parliament Passes Laws That Set Regulatory Framework For Blockchain, Cryptocurrency And DLT

The first law, known as the Malta Digital Innovation Authority Act (MDIA Act), establishes the Malta Digital Innovation Authority and certifies DLT platforms. This law will focus on internal governance arrangements and will outline the duties and responsibilities of the Authority to certify DLT platforms to ensure credibility and provide legal certainty to users wishing to make use of a DLT platform.

The second law, known as the Innovative Technology Arrangement and Services Act (ITAS Act), deals with DLT arrangements and certifications of DLT platforms. This bill is primarily concerned with the setting up of exchanges and other companies operating in the cryptocurrency market.

And the third law, known as the Virtual Financial Assets Act (VFA Act), establishes the regulatory regime governing ICOs, cryptocurrency exchanges, wallet providers, etc.

“The high level principles of the European Union (EU) are reflected onto our laws. We have also based these laws upon 3 basic principles - market integrity, consumer protection and industry protection,” explained Schembri. “The ultimate aim is to bring legal certainty to an environment that is currently unregulated.”

What Malta Is Doing Differently

Finally, unlike Zug (which has become known as “Crypto Valley”), Liechtenstein and other countries innovating in the blockchain and crypto space, Malta is looking at blockchain differently by taking a “technology first” approach to the overall industry.

For instance, while many countries are purely concerned with the financial gains associated with the cryptocurrency space, Maltese officials are carefully evaluating the technology explained in the white papers of operators interested in coming to Malta to launch ICOs.

We are not looking at short term gains here, but rather at the long term evolution of blockchain and DLT technology. For example, if we think about an issuance of an ICO, operators typically present a white paper with the ICO details. While other jurisdictions are looking at the white paper to see if it’s certified, it’s the technology behind that white paper that implements what is written. Currently, no one is looking at the technology. That is something that we are doing differently, said Schembri.

Furthermore, having a strong technical perspective to blockchain, cryptocurrency and the DLT space also allows for Malta to provide flexibility for their newly passed laws. While the laws are indeed robust, the government is taking a “principle-based” approach and will tailor the laws as they see fit based on the ever-changing role of technology.

"We believe that we have found the right formula that will allow us to enact a solid regulatory framework that will protect consumers, safeguard investors and will allow for more transparency and visibility," said Dr. Abdalla Kablan, fintech expert and advisor on blockchain and AI for the Government of Malta, who is helping organize Malta's upcoming DELTA Summit.

According to Kablan, the way that Malta has approached the context of technology is unique in that it is creating a form of regulation through certification in a sector that is currently lacking such measures.

"Regulation will be done without stifling innovation, which is the main driver for economic growth. Think about it as a regulation of engineers by engineers. However, if the DLT technology has financial applications built or deployed on top of it, then these actions will fall under the current financial regulator who has launched the VFA act to govern and regulate virtual financial assets," Kablan told me.