Malta is one of the very few countries who has openly received blockchain technologies into their legislation these past few years. Dubbed as “The Blockchain Island,” Malta has led the first steps toward building a blockchain ecosystem by drafting three legal bills for regulating ICOs, cryptocurrencies, blockchain technologies, and service providers related to this sector last 2018.
The most anticipated bill – The Virtual Financial Assets Bill, is a great contributor to Malta’s booming cryptocurrency industry. Because of it, Malta can now efficiently accommodate the surge of cryptocurrency exchanges that have shown interest in Malta for the past years. For that reason, Malta can certainly become one of the leading hubs for growing blockchain ecosystems.
How did Malta do this you ask? To fully understand how Malta is turning itself into a true Blockchain Island, let us briefly discuss the technology behind blockchain and VFAs in Malta.
What is Blockchain Technology?
The first thing that a lot of people ask these days is “What is blockchain technology?” The answer isn’t that complicated. The blockchain is basically a public digital ledger where economic transactions are stored. What makes blockchain technology unique is its incorruptible manner that offers transparency and security to its users.
The technology behind blockchain lies in its vast database stored in multiple locations. Think about it this way, bankers have a record of how much money you have in the bank, but only they have access to the bank records. This is what you call a centralized network. All the information in your record is only stored in one location. Since there’s only one copy of the bank record, the banker holding your record can easily make changes to the record without anyone knowing.
Blockchain technology can prevent this from happening by saving your record on millions of other locations. This is what’s called a decentralized network. Since your information will be saved on a million different locations, it would be impossible for someone to corrupt your record. The only way they could do it is if they corrupt your record in all locations at exactly the same time.
What are VFAs?
Under the definitions of the VFA Bill, VFA stands for Virtual Financial Asset. A Virtual Financial asset is legally defined as “any form of digital medium recordation that is used as a digital medium of exchange, unit of account, or store of value and that is not (a) electronic money, (b) a financial instrument, or (c) virtual token.” Cryptocurrency is one example of a VFA.
The Future of Blockchain and VFAs in Malta
Malta has become an attractive relocation area for cryptocurrency exchanges around the world. As of this moment, Malta houses giant cryptocurrency exchanges like Binance, OKEx, and BitBay. Because of so, Malta has received a surge of interest from blockchain businesses, cryptocurrency exchanges, and ICOs, including fraudulent ones with intentions of ripping consumers off.
To successfully grow Malta’s blockchain ecosystem, Malta drafted the VFA bill to regulate incoming ICOs. The bill protects consumers while supporting the growth of the blockchain industry by outlining new requirements for entities like cryptocurrency exchanges, portfolio managers, brokerages, eWallet providers, and custodian service providers.
Some of these requirements include following rules for advertising and marketing and the submission of a Whitepaper. The VFA also requires entities to provide information on how the plan to use collected sums of money and how they will carry out due diligence on individuals behind the entity.
By doing so, Malta can prevent its blockchain market from being sullied by fraudulent companies that pose as legitimate businesses who gather large amounts of money by scamming investors and contributors.
And to ensure the execution of this bill, entities must now work with a registered VFA agent who will provide guidance for acquiring a VFA license. Only when the VFA license is acquired will the entity be allowed to facilitate transactions for tokens, coins, and other virtual financial assets.
The VFA act is truly a progressive step towards building a healthy blockchain ecosystem with legitimate entrepreneurs. Because of Malta’s recent actions, it could be safe to say that Malta is headed towards becoming a global hub for future VFA entities.