Blockchain Technology & Malta’s Regulatory Framework

blockchain

Blockchain technology refers to a decentralized and digital technology also known as a Distributed Ledger Technology (DLT) whose function is to record all transaction taking place in cryptocurrency.

This means that every time that a person buys sells, exchange or transfer a digital coin or simply buying of goods and services using virtual currency a ledger supported by blockchain records the transactions in an encrypted manner to protect it from any type of cybercrime. Some of the features of exhibited on blockchain technology include:

  1. Elimination of Trusted Third Parties: Since blockchain is a decentralized type of technology, the intermediary parties are removed and create a direct link between the clients, sellers, and buyers, thus reducing delay, costs, and complexity in the transaction.
  2. Identical System of Records: TheDLTis a unique system in that it all of its members that share a financial market have an identical system of records. This result in finality and immutability of the transactions hence remove the necessity of reconciliation.
  • Less Risk of Hacking the System: The exchange of all information and data is done in an even and synchronous manner and continuously becomes updated implying there are minimum chances of hacking into the system.
  1. Not susceptible to fraud: The general blockchain security and protocol privacy are based on the application of “cryptographic hash function”. This ensures that each chain is identified by its own unique “hash” key. Since the crypto hash key is very complex it reduces instances of fraud.

Malta’s Regulatory Framework

Blockchain technology in Malta– In regard to the rapid global development of cryptocurrency, The Malta government also is known as Malta Financial Services Authority (MFSA) is formulating policies as well as developing the regulatory framework in relation to cryptocurrencies and to entire blockchain technology.  This regulatory framework will establish Malta jurisdiction of control operations and serves as the pioneer for formulating digital currency regulatory framework.

Thus on July 4, 2018, the Maltese Parliament has officially launched 3 bills into law, which became the first legal regulatory framework for blockchain, cryptocurrency as well as the DLT (Distributed Ledger Technology). These historical laws passed were the first bills ever provided as an official set of regulations for operators in the blockchain, and DLT space.regulations for operators within cryptocurrency, the blockchain, and DLT space.

The release of Blockchain laws on July 4, 2018

The 3 historical blockchain technology bills

  1. Malta Digital Innovation Authority Act (MDIA Act)

The first law is aimed at certifying DLT platforms and establishing Malta Digital Innovation Authority. This bill will clearly outline the responsibilities as well as the duties of the Authority aimed at certifying DLT platforms to ensure credibility and grantee legal certainty to persons with interest to operate on DLT platform.

  1. Innovative Technology Arrangement and Services Act (ITAS Act)

The second category of the law is primarily dealing with DLT arrangements and certifications of DLT platforms. The law will scrutinize the companies operating in the crypto market and how other companies will set up and join the market.

  1. Virtual Financial Assets Act (VFA Act)

The third law is the most critical since its main concerned is to the moderation of the regulatory framework governing the regime of ICOs, cryptocurrency exchanges, and wallet providers. This will protect the interest of users by ensuring everything fraud-free.

Several agencies, governmental and non-governmental such as  “The high-level principles of the European Union (EU) have reflected over the three-bill are fully delighted on the steps that Malta Parliamentarian have to establish the historical first laws in order to restore and maintain order and sanity in a rapid developing blockchain technology.

According to Marie-Louise Coleiro Preca(Maltese president), the laws are based on 3 basic principles namely:

  • Market integrity
  • Consumer protection
  • Industry protection

Summary

The ultimate aim of Maltese law for blockchain technology is to bring legal order to a market environment that is currently unregulated. Most part of the globe is very pleased with the regulation framework concerned with controlling e-currency economy. The framework will oversee the main service provideractivities, Initial Coin Offerings (ICO) as well as intermediaries which act at a capacity of brokers, wallet providers,exchanges, asset managers, market makers and investment advisors in relation to Virtual Currencies happening on DLT platform. Thus body or individual intending to interfere with stated laws will be held responsible and suffer the consequences described in digital financial regulations.

Visit https://www.csbgroup.com/ for more information about the Blockchain regulation in Malta