blockchain island Malta

When the market-leading cryptocurrency exchange Binance announced in March it was moving its operations to the Mediterranean island of Malta, it made the industry sit up and take notice. The move raised a multitude of questions and a few proverbial eyebrows.

What makes Malta an attractive hub for cryptocurrency companies?

Why would a major exchange such as Binance go through the arduous process of setting up shop in such a seemingly isolated place at the other side of the world?

Does Malta make special exemptions and concessions for crypto-based firms operating on the island?

What’s the deal?

Binance Moves its Operations to Malta

binance malta blockchain island

Malta was once primarily known more for its stunning natural features such as its dominating cliff faces, its crystal blue waters and its world-class dive spots. These days it is becoming known as Blockchain Island and the home of major crypto exchanges, investment firms, and blockchain tech startups, with Binance leading the exodus from Asia and beyond.

Chased Out of China

Although originally founded in China, Binance has since become locked in legal disputes across not only its homeland but also in Japan and Hong Kong.

As crypto regulations tighten across Southeast Asia for exchanges as well as ICO projects, Binance was one of seven crypto-based firms that received a warning letter from the Securities and Futures Commission in Hong Kong not to trade digital assets.

Regulatory crypto crackdowns across Asia fueled Binance’s decision to seek pastures new. The crypto exchange decided to move their whole operation to Malta. And they also suggested that others should follow suit, which they did. When first announcing their move, Binance CEO Changpeng Zhao made a statement on his Twitter feed that said:

“Malta is very progressive when it comes to crypto and fintech. We think it is a good place for other crypto businesses to look into as well.”

 

Binance CEO cz tweet about Malta

The following message from the Maltese prime Minister Joseph Muscat on his Twitter account welcoming Binance gives a fascinating insight into the difference in attitude between Blockchain Island and the current restrictive crypto climate across Asia.

Malta prime minister tweet Binance

Other Crypto Companies Now Operating in Malta

When a company as large and integral to the crypto industry such as Binance moves its operations to Malta and encourages others to do the same, that’s exactly what happens.

Other massive crypto exchanges such as Bittrex and OKEx are also running some or all of their operations out of Malta. The list of blockchain-related companies continues to rise as crypto investment firms such as Neufund and Coinvest have also made the move.

From blockchain startups to ICO platforms Malta is now a melting pot of crypto-related businesses such as Decentralized Ventures, STASIS, Loci Nexus, the non-profit organization Bitmalta, nChain and the Maltese crypto startup Learning Machine, just to name a handful.

Malta - blockchain island

Why Does Malta Appeal to Crypto Companies?

The obvious reason why so many crypto companies are making Malta their home is largely due to the favorable digital currency regulations on the island. On June 4, 2018, Malta became the first nation to create official regulations for crypto operators.

The Maltese parliament passed three bills that established clear and concise regulatory framework for cryptocurrencies, blockchain technology and distributed ledger technology (DLT). The three Maltese crypto regulatory bills are as follows:

Malta Digital Innovation Authority Act (MDIA Act)

This act was created to establish the Malta Digital Innovation Authority and can certify DLT platforms. This law is in place to focus largely on internal governance and to outline the Authority’s responsibilities to certify distributed ledger platforms to ensure authenticity and the legal compliance of those wishing to make use of a DLT.

Innovative Technology Arrangement and Services Act (ITAS Act)

This bill is used to set up crypto exchanges and other crypto companies. It’s called the Innovative Arrangement and Services Act (ITAS Act) and is also primarily created to deal with DLT certification and platforms.

Virtual Financial Assets Act (VFA Act)

The third and final bill of this three-pronged attack focuses on regulating ICO projects, wallet providers and exchanges. The Virtual Financial Assets Act (VFA Act) was created to establish a regulatory regime that can keep the crypto industry in Malta in check.

The most interesting factor in regards to the three bills is they can be applied to a wide range of industries and technologies and are not necessarily anchored directly to the crypto or financial sector in Malta.

“We Understood Early on That the Serious Operators Wanted Legal Certainty”

When talking about new regulations, the Junior Minister of Financial Services, Digital Economy and Innovation, Silvio Schembri said:

Malta representative“When we started looking into what was needed for the blockchain industry to flourish, we understood early on that the serious operators wanted legal certainty. As of now, operators are functioning in jurisdictions of legal uncertainty. Operators fear that one day a government in that particular legislation will tell them they aren’t within the law – even though there are currently very few laws in place. This is creating legal uncertainty and we wanted to change this

 

Clear, concise, common sense and straightforward thinking are the foundations of Malta’s cryptocurrency regulations and the main reason why this picture-perfect Mediterranean island is now the most desirable destination in the world for all manner of crypto-related businesses.

A “Calculated Risk”

Maltese Prime Minister Joseph Muscat admits that its new laws are a “calculated risk” by fast-tracking blockchain companies and removing bureaucracy. For the moment, however, it appears to be paying off.

Is Malta the Future Epicenter for Cryptocurrency in Europe?

A recent report by a blockchain investment company called Fabric Ventures has shown a massive shift in worldwide ICO token sales. Europe is now leading the world in crypto-asset token sales with $4.1 billion in 2018, which vastly dwarfs Asia with $2.6 billion and the USA with a total of $2.3 billion.

As Europe leads the way for crypto and blockchain technology adoption, could Malta become the future epicenter for blockchain and cryptocurrency in Europe, which ultimately means the world?

Malta might be one of the tiniest nations in Europe, but small things can sometimes cast a big shadow. With a growing reputation as the world’s first blockchain island, easy-to-follow regulations and a welcoming attitude that doesn’t just accept blockchain and crypto, but actually encourages them, it’s no wonder that megalodon crypto exchanges Binance has made Malta its home.

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bithumb

On June 7, 2018, South Korean Cryptocurrency Exchange Bithumb released the results of a user survey called, “Cryptographic Investment Trends.” It captured the perspective of 2,507 virtual currency investors over the age of 20. The survey included questions on investment plans and government regulations. A notable finding was that 42.8 percent of those surveyed plan to “hodl” or keep their crypto-investments over the long term. A Bithumb press release authored by “Bitsumm manager” states:

As cipher money continues to be recognized as an asset in major industrialized countries, the perception of cipher money investment is gradually matured by domestic investors.

Bithumb Survey Findings

The Bithumb survey discovered that the older the cryptocurrency buyer, the more likely they are to plan to hodl and make longstanding investments. Here are the percentages of each age range that plan to preserve their holdings:

  • Investors in their 20s: 30.8 percent
  • 30s: 40.3 percent
  • 40s: 45.3 percent
  • 50s and older: 49.1 percent

Bithumb also shares that 39.5 percent of those surveyed plan to keep their investments, even if the government requires them to pay capital gains taxes, or taxes levied on profits from the sale of assets, on cryptocurrency. This is an 11 percent increase over Bithumb survey data from a year ago. About 13.1 percent responded that they would completely stop investing in digital money if this tax is imposed. The exchange concludes, “more and more investors are looking at cryptographic money as assets and looking for stable investments.”

Bithumb was founded in 2015 and is one of one of the largest exchanges in South Korea. The survey was conducted between April 30 and May 6, 2018, through Bithumb Cafe, Bithumb’s official communication channel.

Other South Korean- and Bithumb-related News

South Korea continues its tumultuous journey to establish crypto-trading regulations, which included discussion of a total ban in January 2018.

Bithumb recently made regulatory headlines when it announced it would ban users from 11 countries in late May 2018 as part of its anti-money laundering or AML policies. Specifically, citizens of countries labelled as Non-Cooperative Countries and Territories, or NCCT, were banned as of May 28. NCCT countries are noncompliant with the standards set out by the Financial Action Task Force on Money Laundering, or FATF, an intergovernmental organization established by the G-7 in 1989. This group of countries includes North Korea, Iran, Iraq and Sri Lanka.

Bithumb stated in a related press release:

We will strictly enforce our own rules and protect our investors, and we will actively cooperate with the authorities. We will lead the standards of the Worldwide Codex Exchange with autonomous regulation ahead of schedule.

Earlier in 2018, South Korean exchanges including Bithumb banned anonymous cryptocurrency trading.

As of May 2018, Yoon Suk-heun, the new governor of the country’s Financial Supervisory Service, is reportedly considering relaxing cryptocurrency regulations.

The featured image is a collage featuring the Bithumb logo (credit: Bithumb) and a public domain survey image.

cryptocurrencies

Legendary venture capital firm Andreessen Horowitz is preparing to launch a new fund that will invest exclusively in cryptocurrencies and other related endeavors.

Tech news outlet Recode reports that the prominent Silicon Valley firm is hiring staff for a “separately managed fund focusing on crypto assets,” which will be the VC’s first dedicated solely to this nascent industry.

That said, Andreessen is no stranger to cryptoasset investing. The firm has invested in cryptocurrency unicorns Coinbase and Ripple, as well as smaller ventures such as CryptoKitties, one of the most popular Ethereum-based decentralized applications (DApps). Andreessen has also provided backing to Polychain Capital, one of the larger cryptocurrency hedge funds.

Little else is known about the new fund, including how large it will be and whether “crypto assets” refers to cryptocurrencies and tokens exclusively or also includes cryptocurrency companies.

Notably, one of the positions for which Andreessen is hiring is a lawyer, who will be responsible for navigating the murky regulatory environment around cryptoassets. In particular, he or she will determine whether prospective investments are compliant with Securities and Exchange Commission (SEC) regulations.

In March, representatives from Andreessen Horowitz attended a meeting with SEC officials along with fellow members of an industry working group. Sources familiar with the meeting — which was also attended by representatives from Union Square Ventures — said that the working group pressed the SEC to provide formal guidance that ethereum and a number of initial coin offering (ICO) tokens are not securities under federal law, but the agency was hesitant to grant this broad exemption.

The other new hire, a finance manager, will assist the firm in collecting investments from its limited partners. He or she will also face the difficult challenge of assigning valuations to prospective cryptoasset investments — a tall order given the novelty of the space.

Andreessen has not yet announced the new fund publicly.

Featured Image from Pixabay