Two of the world’s largest online cryptocurrency platforms plan to transform Malta, the smallest of the European jurisdictions, into a strategic center for the definition and management of their operations. At a time when countries around the world are expressing growing ambiguities about cryptocurrencies, Malta is rewriting the rules that should give owners and managers of exchange platforms and users themselves certainty about the future, both in terms of transparency and tax treatment of any income. What does the European Union think about it?
Analysts and experts, including technicians who closely monitor the phenomenon of cryptocurrencies at the ECB and the International Monetary Fund, argue that not only Malta will soon acquire a financial status but, as it is already for Switzerland, other micro-State candidates will surely follow suit. In essence, those responsible for the EU Member State of lesser geographical scope, aim to increase Maltese fortunes by assuming the most amicable jurisdiction in the world for a sector that still, despite recent reassurances, continues to generate concern among international authorities and national ones regarding fiscal-financial regulatory tasks. This framework is sufficient to explain the hesitations of Brussels and the already anticipated closures by the European Union, as Malta is still in every respect a EU Member State.
In practice, at a time when countries around the world are expressing growing ambiguities about cryptocurrencies, Malta is rewriting the rules that should give owners and managers of exchange platforms and users themselves certainty about the future, both in terms of transparency and tax treatment of any income. The rules will cover the way in which brokers operate, the procedures to follow to conduct exchanges, the modalities that affect managers and traders in cryptocurrencies. In short, “the proposed framework”, declared the Maltese Government, “will offer legal certainty in a currently unregulated space”.
Naturally, the presence of a national tax system that allows international companies registered on the island to pay taxes by applying a rate that rarely exceeds the 5% threshold, is an effective and seductive tool for the operators of platforms and spaces dedicated to trade and buy/sell cryptocurrencies.
The prime minister, Joseph Muscat, said he believes cryptocurrencies are “the inevitable future of money” and in the future they will form the basis for a new economy to come. Furthermore, even in the short term, the arrival of companies belonging to the constellation of the cryptocurrency sector will bring new jobs and greater economic activities which, in turn, will contribute to stimulate economic growth.
Binance, the largest market for encrypted exchange for commercial value, has already ensured that it will “hire up to 200 people” in Malta to carry out and finalize its moving from Hong Kong.
Transparency and legal certainty should be positive for an industry that has been the victim of fraud, but in many cases has lent itself to financial malfeasance and money laundering, hacking and sudden tight regulations. The EU is also examining a new European cryptocurrency regulation, but so far it has not issued any judgment nor released details or insights. This gave Malta the opportunity to take the initiative in drafting its own regulatory framework. Thus, if the EU develops a more coordinated, centralized, transparent and stricter legislation for cryptocurrencies, i.e. for those investing in them, this could imply that even Malta ends up being less accommodating than what is now stated. Of course, Malta is also trying to attract blockchain businesses, aiming to become the center of the cryptocurrency world in the West.
Japan, South Korea and Hong Kong are hosting multiple trades and Asian investors are a big part of global trade. But in the midst of China’s, South Korea’s, Hong Kong’s and Japan’s hard swerve, regulatory uncertainty, which translates into more taxes and more controls, could put Asian cryptocurrency hubs at a disadvantage if Malta should gain popularity. In Europe, there may be competition from Switzerland, another low-tax country. The Swiss Financial Market Supervisory Authority has already stated that it will regulate some ICOs and has launched a so-called “crypto-valley” in the canton of Zug.
After the Binance announcement, other similar companies are trying to reposition themselves in Malta. So it’s no surprise if OKEX Technology Co., a Berlin-based competitive blockchain company, has queued to Binance. In March, Justin Sun, founder of the US blockchain company Tron, also said that his company was “seriously considering” investments and operating activities with Malta as a reference. In other words, major world operators in cryptocurrencies could be concentrated shortly on the island, indeed within the EU.
