Malta’s Finance Minister Sees Finance Middlemen Threatened By Crypto

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those com­pa­nies (and their employ­ees) that spe­cial­ized in the devel­op­ment of pho­to­graph­ic images have been replaced by dig­i­tal cam­eras and have dis­ap­peared from the mar­ket or become unem­ployed.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.


About Dr. Jörg Werner

Dr. jur. Jörg Wern­er, born 27 May 1971, attend­ed the law school of the Uni­ver­si­ty of Leipzig and passed his first state exam­i­na­tion in the State of Sax­ony in 1996. After suc­cess­ful­ly com­plet­ing his manda­to­ry legal intern­ship, he suc­cess­ful­ly passed the sec­ond state exam­i­na­tion of the State of Sax­ony-Anhalt in 1998 and was admit­ted to the bar and began to prac­tice as a Ger­man attor­ney (Recht­san­walt) before the court of Magde­burg the same year. He worked as an attor­ney at the Law Offices of Prof. Dr. Fre­und & Kol­le­gen until he formed the firm of Wrede & Wern­er. He was also admit­ted to prac­tice before the Supe­ri­or Court of Naum­burg. In 2001, he moved the firm’s offices to Cen­tral Berlin, where he was admit­ted to prac­tice before the Courts of Berlin. Dr. jur. Jörg Wern­er then com­plet­ed his doc­tor­al stud­ies at the Uni­ver­si­ty of Ham­burg and grad­u­at­ed as a Dok­tor der Rechtswis­senschaften (Doc­tor of Laws).

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