As Malta Delays Regulatory Clarity, Fewer Firms Remain on ‘Blockchain Island’

It seems that Malta is becoming both less popular among and less populated with crypto firms. The European Union country attracted dozens of industry players in 2018 on the back of the “blockchain island” agenda championed by the local government, but the relevant framework has not yet proven to be effective. Meanwhile, the official rhetoric apparently started to shift away from the blockchain sector, as the government now aims to consolidate it with “other niche sectors.”

Meanwhile, the Malta Financial Services Authority, continues to pluck out non-registered crypto agents — be it the world’s top crypto exchange or smaller startups. But in reality, no businesses have been licensed under the blockchain framework yet, despite it being released in the summer of 2018. As a result, a number of companies have decided to leave the island over the past months. So, who is currently based in Malta, and why?

Crypto regulation was off to a fast start

In July 2018, the Maltese government approved the Digital Innovation Framework, aiming to establish a strong regulatory climate for blockchain innovation and digital assets. The framework comprises three acts: the Digital Innovation Authority Act, the Innovative Technological Arrangement and Services Act, and the Virtual Financial Asset Act.

The latter, which is the most essential act out of three, required businesses to be licensed by the MFSA if they launch initial coin offerings, trade digital assets, or provide electronic wallets and brokerage activities. The act also introduces VFA Agents — the so-called “gatekeepers,” or entities that advise and support crypto firms.

The agency approved the first VFA Agents in May 2019. Currently, there are 21 authorized VFA Agents, according to the MFSA’s financial register. However, no VFA licenses have been issued under the framework yet, meaning that VFA Agents have few potential clients that are willing to apply for it.

Local politicians actively addressed the crypto…

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