The Blockchain Bitcoin & Crypto Weekly CXO Briefing is all you need to know, each week, jargon free for CXO level business leaders and investors who will use this technology to change the world. Each week we select the 3 news items that matter and explain why and link to one expert opinion.
Decrypted: As countries, regions, even cities are considering regulation for cryptocurrencies, the Maltese Falcon is flying high in the crypto world.
Malta’s Cabinet approved the Virtual Financial Assets Bill, that provides the regulatory framework for Cryptocurrencies and Initial Coin Offerings. Malta’s cryptocurrency and blockchain regulations establish the country as world’s first blockchain-regulated state, with clearly established regulatory frameworks for blockchain, ICOs and digital currencies.
Our take: As of July 4, Malta has become the first country in the world to provide legal certainty to cryptocurrencies.
Over the last few months, the Government of Malta has been working with private parties, across various sectors, locally and internationally, to identify the changes in their legislative and administrative framework that are required to accommodate blockchain and cryptocurrencies.
The bills in question are the Malta Digital Innovation Authority Act, the Innovative Technological Arrangement and Services Act, and the Virtual Financial Asset Act. The new laws regulate various aspects of the crypto industry and govern the compliance of crypto-based enterprises with the existing regulations.
- The Malta Digital Innovation Authority (MDIA) Act that is to provide for the establishment of an Malta Digital Innovation Authority, in order to support the development and implementation of the guiding principles to promote consistent principles for the development of visions and skills relating to decentralized technology, and to exercise regulatory functions.
- The Innovative Technology Arrangements and Services (ITASA) Act will provide for the regulation of designated innovative technology service providers and certification of technology arrangements that will be exercised by the Malta Digital Innovation Authority.
- The Virtual Financial Assets (VFA) Act focuses on ICOs and the regulation in respect of certain service providers like brokerages, portfolio managers, exchanges, traders etc., which will be involved in activities related to ICOs.
The Malta Stock Exchange announced earlier this month it will be accepting up to twelve fintech startups to join the MSX Fintech Accelerator, an ecosystem aimed to create and support the wider blockchain scene. Presumably, more applications will be accepted in the future, should the project continue. If the accelerator and the regulations are successful and show promise for Malta’s future in tech, we will likely see other small nations hungry for new revenue opportunities following suit.
In March 2018, the Binance cryptocurrency exchange announced that it will be moving its headquarters from Hong Kong to Malta, due to more strict regulations on virtual currencies in Asia. Following Binance, OKEX announced that it will be expanding to Malta. OKEx is a leading digital asset exchange, that offers token-to-token and futures-like trading.
Japan, South Korea and Hong Kong host a lot of exchanges and Asia-based investors are a huge chunk of global crypto trading. After last year’s crypto crackdown by China, Japan took a crypto-friendly stance, which has been challenged by theft and fraud. While Japanese authorities are still open to digital currencies, they have stepped up their scrutiny of exchanges. Regulatory uncertainty in South Korea and Hong Kong, may put them at a disadvantage, especially if Malta picks up some traction and grows in popularity.
Maltese regulators have been very forward thinking, redefinng basic assumptions about finance and economics, and finding ways to accommodate blockchain and crypto through legislative and regulatory frameworks.
All in all, it’s an exciting time and these new developments will certainly continue to put Malta firmly on the crypto map. Malta has set a very bright example, as its trying to pull the center of the crypto-trading world to the west. Basically, by providing the tools for companies in this sector that allows them to operate, the Government of Malta said to the world, if you operate in the cryptocurrency business then Malta is the place to setup shop. Malta has opened floodgates to massive inflows of capital to island.
Decrypted: Many countries inside the European Union are still struggling to come up with clear regulations that would provide a predictable set of rules for cryptocurrency businesses. However, smaller nations like Liechtenstein and Malta have sorted it out.
In March, Liechtenstein Prime Minister Adrian Hasler, proposed “The Blockchain Act”, a set of new laws and a careful regulatory framework for the blockchain industry.
The law will not only regulate the tax, spending, and issuance of digital currency, but also create advantageous conditions for new fintech businesses. The law is intended to regulate all activities that are possible on technical systems such as distributed ledgers and blockchain systems, and thus provide legal certainty
Our take: Liechtenstein is a little nation between Switzerland and Austria. A bank account is not needed to launch a company in Liechtenstein, and its possible to use Bitcoin (BTC) or Ethereum (ETH), instead of fiat money.
The Liechtenstein government has a defined strategy for fintech and is very supportive to companies that want to start a business. As regulation is essential, the Financial Market Authority in Liechtenstein has set up an internal competence team, the “Regulatory Laboratory”. This team deals with regulation and innovation in the field of financial technologies.
Also at the start of 2018, the Liechtenstein government put a new banking legislation in place to make the financial market even more attractive to fintech businesses by lowering the entrance barriers. Fintechs can now apply for a specific banking license which complies with the European regulatory framework, guaranteeing access to the European Economic Area, including the 28 European member states as well as Norway and Iceland.
According to a comprehensive list compiled by Coin Dance, Bitcoin is unrestricted in 107 countries, but is illegal in at least 10, including Bangladesh, Bolivia, Macedonia, Morocco, and Qatar. Also, penetration is still very small. A recent survey found that only 8% of Americans have invested in cryptocurrencies.
The main issue that is keeping most away, is the lack of regulation. The United States and the European Union are standing on the sidelines, without a clear indication of what the future for crypto will look like. This is not encouraging for many investors, that simply don’t want to enter uncharted waters. This barrier to entry has a clear solution, regulation.
Countries that want to benefit from the growth of blockchain over the next decade, need to regulate. Too many regulations can kill any market, but I think that in order for cryptocurrency to fulfill its future promise, regulations are not only needed, they are inevitable. While the big guys are still ambivalent, small-sized jurisdictions understand the need to be a competitive, which is driving their regulatory efforts. At the same time they’re setting an example, and showing everyone around the world, what they should be doing.
Decrypted: In a paper that was released on the 2nd of July, Vitalik Buterin, the founder of Ethereum, talked about the issue of reimbursing miners for their work, and how to improve the process.
Our take: Growing gas prices have been a big problem for Ethereum, creating difficulties both for users and miners. In their current state, both Ethereum and Bitcoin give buyers the chance to choose the prices they can afford. While Ethereum users can specify the amount of gas they are willing to pay for a particular transaction, they don’t have the incentives to set a higher price than the average, which may means that transactions don’t always go through.
The congestion of the Ethereum network is the result is a disproportionate rise in the price of fees for each transaction, with delays and failures. All this without an actual increase in the total number of transactions.
The Ethereum gas limit, which is the number of data that can be stored in each block, is dynamic. This means that the miner can modify it, allowing more transactions per second, but such an approach can reduce security.
Vitalik Buterin made a proposal to improve the stability of the gas price market, adding that the proposed model :“One proposal for improving stability and user-friendliness of gas price markets: Not dependent on Casper, sharding or abstraction; if well reviewed and people agree it’s a significant improvement, it could technically be implemented as a change to mainnet.”
Today, almost every blockchain platform utilizes a technique that is equivalent to a first-place auction, where miners submit their individual bids and if they are included, they pay what they bided.
In theory, the introduction of uniform price auctions, charging each participant with the same price the price paid by the lowest bidder, could be a way out. This could be great for the Ethereum community, and could help to increase the value of the coin.
Ethereum, the second most valuable digital currency based on market cap, is trading at $480. According to Coinmarketcap, today the digital currency has a market cap of $48 billion and a trading volume of $1.28 billion, over the past twenty-four hours.
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