Did Malta's Crypto Dream Come True by 2020?

In 2018, the Parliament of Malta adopted several laws regulating the industry of cryptocurrencies, ICOs and projects based on blockchain technology. Then, there were statements made by the Maltese politicians, according to which this small country became the first “Crypto Island” in the world. And although Malta was not the first and far from the only one in such undertakings, it was considered a big step towards the long-awaited symbiosis.

It is easy to guess that the emergence of regulatory legislation was followed by a surge in interest from the international companies. The island hosted thematic conferences and opened offices of cryptocurrency exchanges like Binance and BitBay. Moreover, some Maltese universities have started to provide grants for educational programmes connected to blockchain.

What really is going on the “Island of crypto freedom”

Many months have passed. Well, the venture didn’t turn into a failure, Malta remains one of the most “advanced” countries in its relations with crypto technologies. But the reality was not as cloudless as many had expected. Perhaps, the main barrier was the “dark” side of the cryptocurrencies, it’s notorious reputation established by anonymity — which has always been abused by attackers of all kinds. At the beginning of 2019, the International Monetary Fund warned that the exemptions provided by the Maltese government could be used to launder money. The local opposition did not fail in taking advantage of this, criticizing the government for its “pro-crypto” policy.

However, in reality, this policy can hardly be called a soft one. Those wishing to obtain a certificate, giving the right to conduct cryptocurrency-related business, must pass the tests which include a very strict exam. In 2018, only 39% of candidates were able to successfully pass it. This figure could be even lower — according to press reports, at the last moment the criteria for a successful pass were tempered significantly. Technically, there is no unconditional ban on activities without government approval — in many cases, compliance with EU law is sufficient enough. But in practice, crypto startups often have serious problems. For example, in the absence of a license from the MFSA regulator, Maltese banks simply refuse to open the necessary accounts, which greatly complicates the financial issues.

The "crypto climate" is cooling

On February 21, 2020, it became clear that the "crypto climate" in Malta expects a cold snap. On this day, an MFSA statement appeared, according to which Binance did not receive permission to conduct business, and therefore is not subject to state regulation, and any actual activity of the exchange in the country may be the subject of an official investigation. Changpeng ZHAO, CEO of Binance, called the MSFA statement “mix of truth, FUD & misconception’” adding that his company is not based in Malta, nor does it operate there, since the exchange exists in the blockchain world. This statement is believed to have been a reaction to an articlel in the Times of Malta. The article, where the brainchild of Zhao was called the "Maltese cryptocurrency exchange," describes the stories of people who lost their money on Binance.

However, the severity of officials cannot be considered completely unjustified. Just the other day, the MFSA issued a warning that the COINMALEX and Crypto Foxtraders exchanges are not registered on the island, despite opposing statements on their sites. It is noteworthy that the COINMALEX administrators did not hesitate to publish a fake document with the Maltese coat of arms stamp.

So right now optimists believe in a brighter future, attributing the emerging problems to the “childhood diseases” of the new legislation and the relative novelty of the regulated sphere. No wonder — according to the CryptoCompare report, trading volume on Malta-registered exchanges from December 2018 to March 2019 amounted to a whopping $35 billion. However, 87% of these transactions could be rated as “suspicious,” and this, along with other alarming signals, gives pessimists a reason to assert that the paradise on the “crypto island” is pretty far away.