Malta has been in the spotlight of the blockchain space. The island made itself a reputation of ‘a blockchain island’ for offering tax incentives and jurisdictional certainty to cryptocurrency-based businesses. Marcel Cassar, the newly appointed chair of Malta Bankers Associations has shared his vision of blockchain and cryptocurrencies in an interview to local news outlet ‘The Malta Independent’. Cassar reflects on the implementation of new technologies in the banking sector and foreseen competition with fintech companies and IT giants. The chairman believes that the cryptocurrencies are here to stay and compares the furor they made to the early days of the internet.

Cassar distinguishes between the currency and the payment technology. These terms, according to him, answer different questions about the workings of money. The currency is the what and the payment technology is the how. Reflecting on cryptocurrencies, Cassar makes an analogy to the use case of mobile credit in the countries of the Global South. More specifically, he provides an example of the East Africa, where mobile network companies have won the competition over banks as payment intermediaries. The similarity is that in both cases there is ‘a medium of exchange for those willing to offer and accept it’.

As of today, Cassar sees no threat to the fiat currency in the short and medium terms. However, in his view, cryptocurrencies will produce a more significant impact on the current state of the banks. Their functionality as the main intermediary for the financial transactions will be challenged and in the future, might even become obsolete. The chairman still raises questions about the future state of cryptocurrencies.

“But there are still some fundamental questions. Will they be accepted as a store of value? How will they be regulated? Will they become legal tender?”

Cassar commented on the present policies of the banking institutions towards crypto and the reasons behind them.

“Many banks have been steering clear of cryptocurrencies because of the novelty they present, not being conventional legal tender nor backed by a central bank. They also present risks of money laundering because of the inherent anonymity of the assets while the volatility in their prices makes the average retail investor nervous, to say the least.”

Despite the mentioned limitations, he admitted that there are smaller institutions in the EU and Switzerland that enter the cryptocurrency space. These organizations aspire to pioneer the technology and seize the money-grabbing opportunities in the new market.

The governments are no exception to this trend and Malta provides the prime example. In March, the prime minister of Malta proclaimed that the local regulators aim to ‘be the global trailblazers in the regulation of blockchain-based businesses and the jurisdiction of quality and choice for world-class fintech companies’. The chairman of Malta Bankers Association shared the perspective of the bankers association on the news about the biggest crypto exchanges, Binance and OKEx, moving to the country.

“Right now, we are seeing the first exchange platforms seeking to establish banking relationships in Malta and we acknowledge that this is an area of unknown and unprecedented compliance risk for our banks.”

The further actions and policies from the banks, according to Cassar, will be done in coordination with central authorities, namely the Malta Financial Services Authority (MFSA). Cassar is concerned about the potential risks associated with the arrival of the crypto exchanges.

“So we need to be sure of what enhanced risk management and compliance capabilities the banks are putting in place because there are also other important linkages that need to be protected, among others our correspondent banking networks which still see these technologies as new and susceptible to risk of criminal abuse.”

The chairman noted that Malta faces important tests including the first International Monetary Fund (IMF) Financial Sector Assessment Programme for Malta since 2003.

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