Blockchain – The new reg­u­la­tory frame­work

The Malta Business Weekly - - NEWS -

The Malta Cham­ber of Commerce, En­ter­prise and In­dus­try, in col­lab­o­ra­tion with EMCS, or­gan­ised an in­for­ma­tion ses­sion on the new Blockchain leg­is­la­tion which was re­cently ap­proved by the Mal­tese par­lia­ment.

“Blockchain has the po­ten­tial to cre­ate new foun­da­tions for global eco­nomic and so­cial sys­tems rather than be a dis­rup­tive force to­wards tra­di­tional busi­ness mod­els,” said Frank V. Far­ru­gia, pres­i­dent of the Malta Cham­ber of Commerce, En­ter­prise and In­dus­try as he was ad­dress­ing Blockchain – The New Reg­u­la­tory Frame­work event.

“Blockchains prom­ise to pro­vide cor­po­ra­tions with ef­fi­cien­cies in global sup­ply chains, fi­nan­cial trans­ac­tions, as­set ledgers and de­cen­tralised so­cial net­works,” Far­ru­gia said.

The pres­i­dent wel­comed the re­cently ap­proved reg­u­la­tory frame­work which he called a first step in the right direction. “Malta is among the first coun­tries to im­ple­ment reg­u­la­tory frame­works to at­tract new in­vest­ments as it has done in the past in fi­nan­cial ser­vices, avi­a­tion, phar­ma­ceu­ti­cal com­pa­nies and re­mote gam­ing,” he con­cluded.

Ad­dress­ing the sem­i­nar, par­lia­men­tary sec­re­tary for Fi­nan­cial Ser­vices, Dig­i­tal Econ­omy and In­no­va­tion Sil­vio Schem­bri said that Malta be­came the first world ju­ris­dic­tion to of­fer a holis­tic ap­proach to reg­u­late Dis­trib­uted Ledger Tech­nol­ogy.

“The highly an­tic­i­pated bills are now en­acted into law,” said Schem­bri. “The es­tab­lish­ment of the Malta Dig­i­tal In­no­va­tion Au­thor­ity will fo­cus on in­no­va­tive tech­nol­ogy ar­range­ments and their use cases. At ini­tial stage, the Au­thor­ity will only fo­cus on DLT and re­lated Smart Con­tracts. At the moment, the Au­thor­ity is work­ing on the rules and pro­ce­dures to be is­sued for pub­lic con­sul­ta­tion and gather the feed­back of the in­dus­try. This new tech­nol­ogy is ex­pected to im­pact var­i­ous in­dus­tries and thus it is im­por­tant that there is a frame­work for co­op­er­a­tion be­tween the MDIA and other au­thor­i­ties.”

The par­lia­men­tary sec­re­tary also spoke about the Delta Sum­mit − the Malta Gov­ern­ment of­fi­cial Blockchain event that is go­ing to be or­gan­ised be­tween 3 and 5 October. “This will serve as an op­por­tu­nity to meet the first world reg­u­la­tor and demon­strate how far Malta has gone to be­come an in­no­va­tion pioneer.”

Dr Gerd Sapi­ano, an­a­lyst, Se­cu­ri­ties & Mar­kets Su­per­vi­sion Unit, MFSA, ex­plained that the reg­u­la­tory frame­work be­ing pro­posed seeks to en­sure in­vestor pro­tec­tion, pro­mote mar­ket in­tegrity and safe­guard fi­nan­cial sta­bil­ity. Dr Sapi­ano high­lighted that the frame­work shall set out the var­i­ous re­quire­ments which op­er­a­tors in the field must ad­here to; repli­cate the high level prin­ci­ples of EU mar­ket abuse and im­pose re­quire­ments which ex­tend be­yond the fifth an­timoney laun­der­ing direc­tive.

Sil­van Mif­sud, se­nior man­ager Ad­vi­sory Ser­vices EMCS, de­liv­ered an over­view of the Vir­tual Fi­nan­cial As­sets Act. In a tech­ni­cal pre­sen­ta­tion he ex­plained the def­i­ni­tions of DLT as­sets under the Act, li­cens­ing process of ICOs and of VFA ser­vice providers, the fi­nan­cial in­stru­ment test and the anti-money laun­der­ing re­quire­ments.

Gor­don Mi­callef, part­ner, RSM Malta spoke about the In­no­va­tive Ar­range­ment and Ser­vices Act and the Malta Dig­i­tal In­no­va­tion Au­thor­ity Act. Mi­callef ex­plained how pri­mar­ily, the pur­pose of the ITAS Act is to lay grounds on which au­tho­ri­sa­tion of an ar­range­ment or ser­vice shall be granted by the MDIA. “The MDIA Act, on the other hand, out­lines guid­ing prin­ci­ples for the Au­thor­ity in sup­port­ing the de­vel­op­ment of in­no­va­tive tech­nol­ogy ar­range­ments and ser­vices in Malta,” Mi­callef ex­plained.

Ken­neth Far­ru­gia, chief Busi­ness De­vel­op­ment of­fi­cer at Bank of Val­letta said that from an in­dus­try per­spec­tive, banks and fi­nan­cial ser­vices or­gan­i­sa­tions are fol­low­ing progress in the space of DLT and Fin­tech more closely. “Banks are con­scious of the po­ten­tial pre­sented by the in­no­va­tive tech­nol­ogy and are look­ing at ways and means of how they may tap into the ben­e­fits that these so­lu­tions of­fer.”

Far­ru­gia made ref­er­ence to spe­cific case stud­ies and the ben­e­fits DLT so­lu­tions pro­vided, pri­mar­ily in terms of cus­tomer ex­pe­ri­ence, op­er­a­tional ef­fi­ciency through au­to­ma­tion and cost sav­ings. Far­ru­gia went on to high­light chal­lenges that this space presents. “Banks will al­ways tread care­fully as these are new tech­nolo­gies which have to be tried and tested.”

In his con­clud­ing re­marks, Ste­fano Mal­lia, EESC vice-pres­i­dent – Em­ploy­ers, said that this is a very im­por­tant step, as with it Malta gained the first mover’s ad­van­tage on the in­ter­na­tional stage. He ar­gued that it was im­por­tant to find the right bal­ance of reg­u­la­tion in the sec­tor. Under- or over-reg­u­la­tion could both be detri­men­tal to a po­ten­tially im­por­tant sec­tor.

While ac­knowl­edg­ing that it was go­ing to be a chal­lenge to se­cure the in­ter­est of the bank­ing sec­tor in blockchain, Mal­lia said that in the long run, he be­lieved that they would also see the im­mense pos­si­bil­i­ties avail­able.

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