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An insight into Malta’s Digital Economy & Blockchain by Hon. Minister Schembri

June 2018

Mr. Silvio Schembri is a Junior Minister for Financial Services, Digital Economy and Innovation within the Office of the Prime Minister of Malta. Graduated with Honours and a Master in Economics at the University of Malta where he is today a visiting lecturer in economics and finance. Mr. Silvio Schembri was elected to Parliament in 2013 and was re-elected in 2017. In previous legislature (2013) he has served as a Chairperson for Economic and Financial Affairs Parliamentary Committee and was also appointed as Chairperson of the Gaming Foundation.

As a Minister within the Office of the Prime Minister, Hon. Schembri forms part of Malta’s Cabinet of Ministers and is responsible for a wide portfolio including the Malta Gaming Authority (MGA), The Malta Communications Authority (MCA), The Malta Financial Services Authority (MFSA), The Malta Council for Science and Technology (MCST), The Malta Information Technology Agency (MITA), Gaming Foundation, Finance Malta and e-skills Foundation.

During the recent visit to Malta by Mr. Nitin Bardia, a senior editor & member of board of Wealth Monitor had a chance to interview Hon. Minister Silvio Schembri, where they discussed various aspect which includes Financial Markets, Future of  Blockchain technology, Digital Economy, etc here we are sharing the views of Hon Minister Mr. Silvio Schembri.

Financial Markets

How you are able to position Malta in as a Financial Hub, what value proposition you think you are able to provide which differentiate Malta from other countries who are looking forward to emerge as a financial hub like Dubai, Azerbezan etc.

Due to its strategic position, Malta has always been inclined to position itself as a hub. During the last decades, the financial services has grown steadily and consistently and now represents over one-tenth of the Maltese economy. We are now at a stage where Malta needs to evolve into the next phase and starts playing a more leading role in the global financial market.

In the past, the small market size might have acted as a drag towards its evolution; however, the increasingly central role of technology in financial services is opening up opportunities that might not have been present in the past.  Indeed, we believe that the proliferation of new and emerging technologies will have serious impact on the majority of industries such as financial services, online gaming and intellectual properties. Malta needs to lead in this area by being proactive, open to business, attracting entrepreneurs and investors from all over the world.

As a jurisdiction, Malta aims to position itself different from other financial hubs around the world. We are offer flexibility, stability, and accessibility. These, we believe, are fundamental to attracting financial investment to our shores. Let’s also keep in mind that as a full member of the European Union, entities operating from Malta do benefit from several advantages which include pass-porting rights to the single market.

Region is looking towards development of financial, currency and commodity exchange within a highly regulatory framework. Lot of volumes have been seen in currency derivative across global exchange. What are your views on the same to develop Malta as a global hub in Fintech?

 We see the increasing use of technology in the financial services as very important to the growth of this sector in Malta. The main reason being that opens new market to us while it compliments what is already present. This will certainly increase the complexity of the market and the use of derivatives might expose us to new risks. However, we look at these as opportunities.

During the last months, a policy decision was taken to have the Malta Financial Services Authority (MFSA) involved in Fintech. It was, and still is, a central part of the restructuring of the financial regulatory where a specific Unit has been set-up to cater and regulate Fintech and other related services and products.

The active targeting of this sector requires new skills and technology, not only in terms of the financial regulation, but also for the whole sector per se. Thus, all efforts are being make to facilitate the transfer of skills and knowledge.

Blockchain & Digital Economy

Two things which I came across – Firstly Binance The world largest crypto currency exchange relocating to Malta from Hong Kong,  and secondly report publish by Finch and IMF that strong economy resulting in better quality of life with High Per Capita Income. How these things can be linked, is Malta Govt. taking some steps, which are promoting Block Chain and Crypto Currency?

Last year, the Maltese Government made it clear that it wanted to introduce a regulatory framework upon which DLT can operate. A consultation document was launched earlier this year and a few weeks ago three Bills were presented to Parliament. One of the bills will be establishing a new entity that will be certifying DLT technology arrangements while another bill will be regulating virtual currency, ICOs, exchanges and related services and products.

These bills take a very holistic approach to regulation of this space and are based on offering customer protection while safeguarding market stability and integrity.  During the drafting stage, we consulted extensively with stakeholders including the industry and we strongly believe that the final Acts will position Malta as the leading jurisdictions in the space. Binance was among those that made public its intention to move to Malta. However, it was not only Binance as other very big players have followed suit and declared their intention to start operation from here.

Equally important is the fact that international institutions such as the IMF and the European Commission made statement where they expressed their confidence that what we are proposing is stable and sustainable. This is similar to our i-gaming which only a few weeks ago was described by IMF as exceptional for having a very high level of regulatory framework.

World seems to be divided on crypto what is the view of your government on crypto and block chain. How you think it’s going to bring some change in last man life?

Despite being around for a few years, crypto currencies really entered in the mainstream only lately. It’s a very innovative concept and even from a theoretical point of view it challenges some long held common beliefs such as the need to have a strong central authority behind a currency. Obviously, the use of crypto is not limited to transactions and at the moment the majority of users view it more as a digital asset. What is certain is that is opened a new dimension and is playing an increasingly bigger role in ‘financial’ world.

Crypto is disruptive by nature and thus it is to be expected that among the first reactions there are some that view it very negatively. However, over the last months, a notable shift can already be witnesses. At an institutional level, until six months ago, the trend was more towards banning. Now, this have shifted and most of talking about regulating it.

We do believe that the emergence of cryptocurrencies is here to stay and there are no other options but to regulate it. We as jurisdictions, we have move quite rapid on this front, we offer the most comprehensive form of legal framework in this regard.

Views on territory issues on blockchain (Jurisdiction) liability on blockchain and any highlight on ICO?

Digital technology has immensely changed our society: how it works, how it communicates, and how it does business. The transformation continues as digital technology evolves further. We rare now witnessing the proliferation of DLT with its new uses and applications.

The issue of territory is a very interesting topic and have similar similarities to the internet and other digital assets. The issue of territory is debated across different spheres as for example it is also central of what is referred as collaborative economy which is a sort of hybrid market model of a peer-to-peer exchange where transactions are often facilitated via community-based online services.

Something highly related to this is the issue of legal personality of the technological arrangements.

 

 

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