Courses for digital currencies have behaved turbulently since the beginning of the year. After nearly all crypto-currencies tallied record highs at the end of 2017, prices plunged significantly at the start of the year. From Bitcoin to Etherum, Ripple or IOTA, most of the larger “cryptos” declined decisively in terms of value. Critics viewed themselves as vindicated and in some cases secretly hoped for a final death knell. National banks that had warned about a speculative bubble for quite a while seemed satisfied. Actually, however, digital currency rates oftentimes sink at the start of a new year. On the one hand, this may be due to course corrections. On the other hand, some experts cite connections to Chinese New Year’s festivities. As Bitcoin and Co are significantly more prevalent on Asian markets, course reactions to local events can be more severe, and when Asian traders have returned from the holidays and are again sitting in front of their computers, there will be certain to be more action on the exchanges.
Why Crypto-Currencies are More than a Speculative Investment
In the title, I speak about a digital currency revolution. Actually, however, many continue to view Blockchain and other digital payment technologies more strongly as investments. This is also the main reason for the underlying criticism. Yet, I think that such view does not go far enough. In this case, we are not dealing with a new financial product traded on existing financial markets. Rather, crypto-currencies should be viewed as disruptive innovation that in the ling run will radically alter our daily lives. Where in the past we went shopping with thickly filled wallets in our pockets, in the future a mobile phone will be enough. There will be no cards, no signatures and no PINS for us to memorize. Is that still a vision of the future? Yes, maybe, but not the all-too-distant future. The law offices of Dr. Werner & Partner cooperate with many different types of companies, some of which are heavily involved in the developments surrounding the emergence of “industry 4.0” in which more work is taken care of by machines. In the long run, anything that can be better taken care of by a computer will be taken care of by a computer because it can do it faster and with superior quality. Computers will better communicate and exchange data with each other, and such data can in turn be interesting in the context of crypto-currencies. I know this seems like a stretch, but I want to clarify to clarify to our readers that crypto-currencies cannot be classified as another short-term phenomenon but instead have the power to change all of our lives.
How Do Nation-States React to Digital Currencies?
Since the hype began regarding their extreme increase in value, it has become amply clear that nation-states are viewing the technology in a highly critical manner. Among others, the President of Germany’s Bundesbank, Jens Weidmann, has made critical comments stating that Bitcoin is inefficient from both an economic and ecological perspective. Clearly, he is unimpressed with digital central bank money. Many of his European and international colleagues agree. Other states, such as Venezuela and North Korea, have performed their own ICOs and have “founded” crypto-currencies. Admittedly, these have encountered payment difficulties, and the underlying motivation is easy to recognize. Why is there then this fundamentally critical and rejecting attitude towards new payment technologies? On the hand, lack of transparency and an inability to trace are typically criticized. Still, in this regard the technology can prove that it works, as each payment is documented and remains in the Blockchain forever. It is just not controlled a state organ. The accusation that the financing of criminal is simplified by digital currencies is a disputable claim but one that the technology must bear. Criminalizing the entire technology, however, leads in the wrong direction.
Nation-States Lose the Opportunity to “Print Money”
The real issue, of course, is different, as crypto-currencies can operate without third party institutions otherwise needed to legitimize a currency. Up until now, this function was exclusive to central banks. Now, however, all that’s theoretically required are a paying party and a payment recipient. The network of other actors then confirms and thus verifies the payment. Until now, central banks were the primary institutions in the money market. They could determine the money supply and central bank interest rates. Historically, they have always consistently made use of this function. The supply of money was thereby increased to almost unimaginable proportions, and a devaluation took place. Currently, the ECB has pumped approximately EUR 60 Billion every month into the market during the past two years via bond purchases and increased the money supply accordingly. This option is removed by digital currencies.
How Malta Wants to Regulate Crypto-Currencies
While many states are closing themselves off against crypto-currencies, Malta is seeking to accept their challenge. As the first country in the world, the island nation is currently preparing regulation. For the Maltese government, this is viewed as the next logical step towards a competitive and more future-oriented economy that will be competitive in the international marketplace. Creating the right regulatory scheme is thereby not easy, but it is essential for businesses operating in the Blockchain sector, as transactions can only be concluded in a safe and legally binding manner given the right regulations. The goal is thus to place digital currencies on a sound legal basis. In all likelihood, Malta will be focusing on an approval and licensing regimens for crypto-exchanges as well as for money processing companies. Exchanging parties could thus be legitimized by a state-sponsored licensing procedure. Whether or not this will be performed by the Maltese MFSA or by a completely new regulatory authority remains to be seen.
The Current Status of Regulatory Developments in Malta
Right now, the situation in Malta is somewhat in limbo. The government has already declared that it has recognized Blockchain as a market of the future. As the financial industry plays an important role in Malta, the government wants to create an attractive offering so that sector will continue to remain competitive in the future. Numerous working groups are currently working on developing licensing procedures. What exactly these may entail remains unclear. Perhaps they will be similar to proceedings for gaming licenses. The law offices of Dr. Werner & Partner have experienced colleagues who up until a short time ago worked for the MFSA and are highly familiar with the commissions’ activities. We are therefore ideally equipped and can already help you today by providing the most important documents. That way you will not have lost a moment when the time comes.
