Malta Digital Innovation Authority to launch Policy
The government has announced the launch of a policy document. This will be regarding the Malta Digital Innovation Authority, in an attempt to offer legal certainty in Blockchain technology and by extension cryptocurrencies.
So far, Blockchain technology (a concept forming part of the wider Distributed Ledger Technology – DLT) has not been regulated in any way by any institution or body worldwide. This technology involves a consistent increase in records, called blocks, that are connected and secured through the use of ‘cryptography’. Every record is linked to the record that comes before it, and contains transaction data and also a timestamp.
When the block is given a timestamp, the record is no longer alterable. This technology could provide the opportunity for more efficient procedures in day to day life, despite its notorious complexity.
An example of this would be in the music industry. Bands could utilise DLT platforms such as Blockchain in order to eliminate the intermediate required for receiving royalties when people download their music. Instead, transactions would be made across a peer-to-peer system, where they are computed, verified and recorded through an automated consensus method.
The responsibilities held by Malta Digital Innovation Authority include a wide variety. Furthermore, one of these roles would be to certify DLT platforms in order to provide legal certainty for those that make use of them.
Presently, if a company were to utilise a DLT platform for the sake of bypassing central authorities to account for a cheaper and more efficient process, this would entail using an uncertified platform.
By creating this authority, the government will certify a platform (e.g. Blockchain), and certified surveyors in the authority will in turn verify that the information being logged onto the platform is
authentic material. Through this, companies that use DLT will therefore have peace of mind that the platform is genuine, offering legal certainty, whilst simultaneously making operations more efficient.
The parliamentary Secretary for the Digital economy, Silvio Schembri, further explained to stakeholders what it takes to launch the policy document. He stated that this “historic moment” will be completed in three phases.
The first step involves the actual setting up of the authority. Step two relates to the launching of a Bill that sets out the system of registration of Technology Service Providers and the process of certifying Technology Arrangements. Step three will then launch a Bill that provides the framework for initial Coin Offerings (ICOs) and the regulatory system on to the supply of certain services relating to virtual currencies.
ICOs are methods for new digital currencies in order to create financing. This is accomplished by offering investors the new currency in exchange for alternate, more established ones, for example: Bitcoin and Ehterium.
Those subject to the virtual currency Bill include brokers, wallet providers, exchanges, investment advisors, asset managers and market makers working with virtual currencies (issued by the MFSA).
Schembri manifested how the setting up of the new authority and promoting government policies of which are in favour of Malta being the new hub for advanced and innovative technologies, are some of the objectives to be pursued.
Additionally, the objective is to inspire innovation in the design, as well as in the actualisation and use of new technologies. It is significant to also facilitate innovation by creating a system based on the use of newly advanced technology in useful business cases.
The implementation of anti-money laundering directives is also a priority maintained by the new Authority, also acting as a consultation board.
There are three kinds of DLT platforms, including: those for the purpose of private consumption (e.g. an internal payroll system for a large company), private DLT platforms that are created for the use of regulated organisations, (e.g. a financial institution using a platform to be used by its clients), and lastly: a public platform that shares the functions of consensus (such as Bitcoin and Ethereum).
Schembri then offered examples of how DLT platforms may be utilised in practice. This involved using Blockchain technology for the purpose of recording and managing the circulation of good and related invoices, therefore substantially alleviating the risk of errors and the opportunity to change invoice values and recipients.
He insisted that this will support the supply-chain by providing the opportunity to trace products back to their sources.
Schembri elucidated the process of consultation including all relevant stakeholders,national authorities (including the Financial Intellifence Analysis Unit – FIAU) and the police, coupled with local industry players as well as international. All whilst also consulting with international authorities prior to the launch of the policy document.
Throughout the upcoming three weeks, the public is able to freely offer feedback on the objectives and ideas that have been set out. After, the three Bills and a full explanation of the policy’s system will be presented in Parliament.