Malta and its regulatory efforts on Blockchain, Virtual Currencies and Innovation

The Maltese Parliamentary Secretary for Financial Services, Digital Economy and Innovation published a Consultation Document on the establishment of a central authority responsible for digital innovation in Malta, on the certification of Distributed Ledger Technology (“DLT”) Platforms and related service providers. This document also includes the Maltese Government’s reactions, additional information and an update on the changes made to the proposed Virtual Currencies Act following receipt of feedback from the industry to the Discussion Paper on Initial Coin Offerings, Virtual Currencies and Related Service Providers (the “Discussion Paper”).

This Consultation Document discusses three bills:

  1. The Malta Digital Innovation Authority Bill (“MDIA Bill”), a bill which will provide for the establishment of a central competent authority;

  2. The Virtual Currencies Bill (“VC Bill”) reflecting the changes made to the proposed Virtual Currencies Act which will provide for the legal framework for regulating ICOs and intermediation of Virtual Currencies; and

  3. The Technology Arrangements Bill (“TAS Bill”) which shall provide framework for the registration of Auditors and Administrators of DLT Platforms and certification of such platforms.

We are delighted to see the Maltese Government putting blockchain technology and innovation at the top of its agenda. We are also pleased to see an open approach from the Government, where although it does not commit to implement such applications, it acknowledges the various alternative applications of the Distributed Ledger Technology besides the transfer of cryptocurrency, such as in voting processes, where it enables voters to vote via smartphones and the verifiable results will be available almost instantly, or in sharing confidential patients’ healthcare information from one hospital to another without any breaches of privacy. The Consultation Document rightly points out how DLT is based on five main pillars:

  1. Shared Information – A shared digital ledger that keeps a record of all transactions taking place on a peer-to-peer network;

  2. Decentralisation – The digital ledger is decentralised which eliminates the need for a central certifying authority;

  3. Encryption – All information transferred is encrypted and every occurrence recorded to ensure no unauthorised alterations occur; and

  4. Security – Private keys ensure that encrypted information is shared without the risk of privacy breach.

We will be providing further detailed information and updates on the Consultation Document and on the three proposed bills in the coming days.