During a private interview (and not during his actual speech) at the Delta Summit, Maltese Finance Minister Edward Scicluna caused a stir with an edgy statement. Asked about the future role of blockchain technology and upcoming changes in the financial industry, he says that financial intermediaries are “facing the chop”.
He compared the situation to the development of the photographic industry: those companies (and their employees) that specialized in the development of photographic images have been replaced by digital cameras and have disappeared from the market or become unemployed.
Many financial intermediaries could soon be faced with a similar situation. What is interesting here is described time period. Although Scicluna did not give any concrete annual figures or a time horizon, the phrase “in the not too distant future” implied that this change could occur earlier than many of the intermediaries concerned might want to face.
At the same time, the 72-year-old minister noted that he himself did not own any crypto currencies. However, he had learned a lot from his son, who had already invested in Bitcoin in the first few years and traded in the currency. He concluded his interview with a recommendation for the financial intermediaries concerned: they had to listen attentively and well to the market, just as the banks are already doing it.
How The Blockchain Replaces Intermediaries
But why exactly will the blockchain be able to replace intermediaries, the so-called “middlemen”? The key to this lies in the word “decentralisation”. The current model of middlemen/brokers – whether in the financial sector or in other sectors of the economy – is to monitor, verify and process transactions between two market parties, buyer and seller (such as a commodity exchange).
Because middlemen guarantee the correctness and integrity of these transactions and have to check or audit them regularly, market participants usually incur high transaction costs that finance the middlemen’s business. Thanks to Blockchain and Distributed Ledger Technology, however, it is possible that – instead of a central storage location – ledgers stored locally on several computers and updated in real time list the ongoing transactions. By means of a consensus mechanism, the validity of a transaction is confirmed by the participating computers of the blockchain network and stored on the blockchain. The verification and decision as to which transaction is correct and valid will in future be carried out by independently operating, participating computers of a blockchain network instead of a central financial intermediary.
Even more important for the elimination of middlemen, however, are “Smart Contracts” based on block-chain technology. Smart contracts are agreements programmed into code that are automatically executed when predefined conditions or limits are met.
Two possible applications of Smart Contracts for the financial sector are contracts for difference or the automatic payment of dividends. [1].
Maltese Government hosts Delta Summit with Top Speakers from the Crypto Scene
In line with the Maltese government’s goal to position Malta internationally as “Blockchain Island”, the government has officially taken over the patronage and co-organization of the large Blockchain Congress “Delta Summit”, which took place in St Julian’s from 3 to 5 October.
Apart from the apocalyptic announcement of the Maltese Minister of Finance concerning financial brokers, the Congress was marked by the presentations of numerous big names from the blockchain space. On the side of the Maltese government, Silvio Schembri, Junior Minister for Financial Services, Digital Economy & Innovation and Prime Minister Joseph Muscat took part in the conference. Many well-known representatives and companies from the blockchain and crypto scene also attended.
It was especially the presentation by Binance CEO Changpeng Zhao (“CZ”), which was awaited and watched closely with great interest worldwide. The company had already announced at the end of March this year that it was setting up a branch on the Mediterranean island. Since then, this decision has been considered the best example of the success Malta has achieved by drafting its legislative initiatives in the area of Distributed Ledger Technology and 4 different licensing arrangements for virtual financial assets.
Prime Minister Muscat sees Malta as a leader in blockchain legislation
In his opening speech, Prime Minister Muscat expressed his thanks for the active participation from all over the world and wished participants a successful and fruitful event. At the same time, he saw the large international field of participants as confirmation that Malta was on track with its clear goal of becoming the most attractive location for blockchain companies worldwide.
He recalled the objectives agreed with Minister for New Economy and FinTech Silvio Schembri (who spoke at a panel discussion during the conference) 2 years ago and the busy, laborious but worthwhile way leading up to the congress. Satisfied, he reported that colleagues from all over the world were approaching and asking him about the success of Malta’s blockchain legislation.
Malta’s Commitment To Discuss & Collaborate With Start-ups
He then reaffirmed his government’s commitment to this goal and emphasized the proactive and thoughtful role that legislators should play in the creation of business-friendly and customer-centric, appropriate regulations and frameworks. His government was pleased to see the great interest shown by the crypto and fintech scene, but also knew that Blockchain offered many more use cases in a wide variety of industries that needed to be explored.
At the end of his speech, he underlined Malta’s willingness to enter into discussions and dialogue with blockchain companies regarding their needs and wishes with the following words:
“We are as eager as you are. We are as excited as you are. We want to hear from you about your next big idea and we want to know how we can help make it happen. Welcome Home. Welcome to Malta, welcome to the Blockchain Island!”
We are also at your disposal if you would like to establish Malta as the home of your Blockchain company. We support you with our services in the area of blockchain and ICO and are at your disposal for a personal conversation.
[1] http://digitalchamber.org/assets/smart-contracts-12-use-cases-for-business-and-beyond.pdf
