Promoting Malta as a crypto island

This week in Tokyo, Japan, the Prime Minister led a trade mission composed of over 50 people including the top brass of the Malta Tourism Authority to revive business opportunities in a number of sectors including crypto and blockchain applications.

He told Japanese Prime Minister Shinzo Abe that Malta would support an EU-Japan partnership agreement which will soon start functioning and bear fruit. Malta exports more in value than it buys from Japan – the imbalance is mainly from exports of live tuna. One way to reduce the imbalance is to start promoting Malta as a destination for Japanese tourists since out of the millions that travel to Europe only about 42,000 visit Malta. This figure may increase if efforts are intensified by MTA while no stone should be left unturned to attract students who visit language schools. The latter can easily apply for a job due to recent changes in legislation.

Speaking to journalists, Dr Muscat was enthusiastic about Malta being a pioneer country as it was among the first to welcome blockchain technology. In his opinion, this is not just about Bitcoin, which can be so versatile that it can, for example, be implemented in both the lands and national health registries. In his vision, such systems could also be used for cross border payments, such as in remote gaming and in oil and gas industry, where operators want to have “immediate and transparent transactions”. He foresaw other applications including archiving the music industry, the collection of royalties, as well as smart contracts, allowing individuals in one country to purchase property in another, without the need for middlemen. Using the technology in the public sector will certainly render it more efficient. Its future use can involve the efficient maintenance of public registers and data mining. In this regard, it can simplify the management of such information and make it easier for citizens to access critical areas in the public sector. This technology recently saw the promulgation of three acts. The first one is termed the MDIA bill, which will provide for the establishment of the Malta Digital Innovation Authority as a central regulator. One expects that the law will promote government policy towards the industry and set the foundation for the development of Malta as a hub for new and innovative technologies.

Another piece of legislation called the TAS bill will set out the regime for the registration of technology service providers and the certification of “technology arrangements”. This framework will allow for the used as a form of money that is not issued or guaranteed by a Central Bank or by any other authority and is not equivalent to traditional currencies. On the other hand, the IMF was less cautious and recently conceded these currencies are facing “technological” problems which could eventually be solved, and that as such they could be “easier and safer” to hold than paper bills in remote regions, or countries with unstable national currencies or “weak institutions”.

In a number of cases, exchange platforms have gone out of business or have failed – in some instances due to hacking by third parties. Money can be stolen from your digital wallet as these are not impervious to hackers. Now, one must find one’s way through the labyrinth to explain its origins that so far has been shrouded as a mysterious currency and explain how it works. A virtual currency digitally represents the concept of value and can be used in a digital framework as a medium of exchange, a unit of account and a value storage. However, it should be noted it does not have a link to any particular jurisdiction and, hence, does not qualify for a legal tender status. No jurisdiction guarantees the performance of its functions, which is only held together by the mutual consensus of the community of users. Paper and coin money, to which we have traditionally been accustomed, is referred to in various ways, such as, fiat money, real money, and national currency. As a matter of fact, fiat money is recognized in the country that issues it.

The uniqueness of a virtual currency is that in itself it does not entail prior authorisation by a centralized entity. Both a business trader and a customer can effect payments in a virtual currency without being tangled in the banking hegemony or the financial services market. So how does one start to trade? One can earn or purchase virtual currencies. The issuance and management of a virtual currency is dictated by elaborate open source code algorithms that necessitate the property of uniqueness. One acknowledges that cryptocurrency operates by means of a combination of public and private keys.

Put simply, the purpose of the public key is the confirmation of the existence of a discrete virtual currency unit and of its uniqueness. The private key is more or less a secret code which is stored in the owner’s digital wallet which is created by means of software or a platform intended for virtual currency trading and used for the acquisition of goods and services.

What are the advantages of using such currencies? The answer is that virtual currencies are decentralized, free of bank formalities and use a secure ledger holding the details of the movement of its value. Only time will tell if we succeed to create a well regulated market and establish standards for the harnessing of this technological revolution. Without doubt, the Prime Minister’s visit to Japan has oiled the wheels of progress for its early adoption. Fortune favours the brave and proactive.