Blockchain Island Malta is known worldwide for the pioneering role of its government in DLT technology, but also as the location of crypto exchanges such as Binance and OkEX. Now Malta is preparing to present itself as a suitable domicile for security token financing.
These efforts are being driven primarily by the Malta Stock Exchange under its experienced and internationally respected Chairman Joseph Portelli. Portelli and his team are conducting an extensive roadshow to New York, London and Tel Aviv, among other places, and are campaigning fiercely to promote Malta as a location for this exciting future market.
Portelli is particularly confident about Malta as a future location for Security Token Exchanges. He predicts to the participants of the roadshow that by the end of 2020 Malta will have the highest density of Security Token Exchanges worldwide — even higher than that of the USA.
Of course, Malta’s existing positioning as Blockchain Island should also be helpful in realizing this vision. Portelli lists several advantages of Blockchain technology and security tokens in an interview conducted during the Southern EU Summit. On the one hand, he mentions “proxy voting”, i.e. the exercise of voting rights by security holders. By means of Smart Contracts, token holders can easily cast their votes regarding concrete decisions. Here, the blockchain would dramatically simplify a previously cumbersome and costly process.
Security token (financing) as a paradigm shift in the financial market
Probably no field, however, will be more affected and transformed by blockchain technology and security token offering than SME financing. According to Portelli, companies that want to raise a certain amount of assets no longer have to go through a costly regulatory process. Blockchain-based smart contracts — instructions programmed in code — make it possible in many cases to eliminate middlemen and thus reduce costs.
Portelli describes that security tokens do NOT bring about a revolution in the financial sector (as many experts argue), but rather an evolution of it. There would be a paradigm shift from one extreme to the other. It is precisely small and medium-sized enterprises (SMEs) that could benefit most from this development, because by costs reduction make access to and listing on stock markets affordable, says the chairman of the Malta Stock Exchange.
For example, even those wishing to collect only small amounts of capital on Alternative Investment Market (AIM) — the London stock market for SMEs — already face costs for underwriters, regulators, lawyers and accountants in excess of one million euros.
The Malta Stock Exchange already offers SMEs the opportunity to use security tokens for raising capital and obtaining a listing at very low cost. For this purpose, a platform for SME financing is being developed based on the British model of AIM and the methodology of NOMAD (nominated investor). The reason for this is to ensure adherence to existing regulations for governance, risk and compliance.
Portelli foresees that with this platform, the Malta Stock Exchange could possibly establish itself as the world’s leading stock exchange for SME financing within the next year.
MFSA & AIFU Publish Guidance Document for Investors of Fintech Companies
Thanks to its world-famous financial sector, its technology-friendly legislation and now its positioning as Blockchain Island, Malta attracts FinTech companies and start-ups from all over the world.
A big problem that Fintech start-ups have had to struggle with so far was raising capital from the traditional financial sector. Because this could become an obstacle for the entire industry and ultimately even for Malta as a business location, the Financial Intelligence Analysis Unit (FIAU) and the Malta Financial Services Authority (MFSA) have now jointly issued a Guidance Document aimed at companies that have FinTech companies as customers. These are mainly payment institutions, credit institutions and electronic money providers.
The aim of the document is to assist these companies in implementing certain procedures, policies and processes to better analyze risk assessment or other aspects of these FinTech companies. It is also intended to strengthen and methodically comply with FIAU-given recommendations to prevent the support of money laundering or terrorist financing activities.
It addresses the risks associated with crypto currencies, which the International Monetary Fund had warned against in discussions with the Maltese government.
The authors stress that the document should help make financing more accessible to FinTech companies while ensuring that the most stringent corporate financing requirements and security guidelines are met at all times.
Banks in particular could better respond to the financial needs of companies in the future, since — according to the authors — a supportive and flexible banking model is essential for the success of Malta as a financial centre.
Malta puts rental contracts on the Blockchain
In view of a construction boom, steady population growth and rapidly rising rents, a reform of the rental law was urgently demanded from many sides in Malta. The Maltese government under Prime Minister Joseph Muscat has now decided on an extensive reform of the existing provisions, which will come into force at the turn of the year. The innovations also include the use of blockchain technology.
As of 1 January 2020, all rental agreements in Malta must be registered and stored on the Blockchain. This will ensure that leases are stored in a secure environment and that no false entries can be registered. Above all, however, this is intended to put a stop to the existing black market. Ultimately, the lease register, which is administered by the Housing Authority, serves to protect landlords and tenants alike.
Once again, the Maltese government is demonstrating that Blockchain Island is not only trying to attract innovative companies from all over the world using DLT technology. No, they set a good example themselves and are constantly looking for new and better opportunities to benefit from the technical possibilities of Blockchain technology in administrative and official matters.
This measure follows further initiatives of the Maltese authorities. As we have reported, it was announced at the beginning of this year that all degrees awarded by Maltese universities will in future be issued via the blockchain in order to avoid false statements and for better traceability.
- Risk-based approach to Supervision or Monitoring of VASPs (Virtual Asset Service Provider) - 11. November 2019
- The importance of AML compliance - 4. November 2019
- Malta as the ‘epicentre’ of security token financing - 26. August 2019
- Current developments in crypto currencies and the blockchain on Malta - 24. May 2019
- Regulation of crypto currencies and ICOs — International comparison - 10. May 2019
- MFSA Publishes Guidance Note Against Crypto Scams & Appoints First VFA Agents - 29. April 2019
- Blockchain & AI Summit Malta + Blockchain University Degree Malta - 20. March 2019
- MFSA Publishes Consultation Guide on Cybersecurity Regulations for Blockchain Companies and VFA Agents - 12. March 2019
- Malta’s New Tech Authority: Malta Digital Innovation Authority (MDIA) - 5. March 2019
- OECD report: ICOs for SMEs an appropriate form of financing — under certain conditions - 11. February 2019