Could Malta Suffer a Downgrade to “The Blockchain Garage”?

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It’s no secret that Malta has been suffering heavily since Joseph Muscat (Malta’s Prime Minister) and Silvio Schembri (Malta’s Junior Minister for Financial Services, Digital Economy, and Innovation) rolled out blockchain-friendly laws back in November 2018. A new satirical article published on the popular Bis-Serjeta site joked that Malta is downsizing to being the blockchain garage, but the article actually speaks the harsh truth.

Quiet Fee Hikes

Back when the regulations were introduced, the fees to submit a whitepaper were a low €4,000– achievable by most projects before they get ICO funding. However, as 2019 slowly rumbled on and government officials tried to generate more money from the regulations, the fees to submit a whitepaper were doubled to €8,000 – almost overnight with no news coverage. Malta has a habit of hiking prices quietly in the night, and with ICOs at an all-time low, hiking the cost to submit a whitepaper to launch an ICO on the alleged “blockchain island” seems like a poor move when trying to stimulate innovation and growth.

On top of the outrageous whitepaper listing fees, you must hire a VFA agent – two thirds of which failed the exam first time around – which can set you back anywhere between €10,000 and €15,000. Finally, ICOs in Malta are also required to pay an annual supervisory fee, ranging from €5,500 all the way up to €550,000 – depending on your project’s turnover at the end of the year.

Taking Customers for a Ride

Aside from the quiet rate hikes – most likely to cover the bills of having very few ICO applications – Maltese business owners have been taking customers for a ride in the crypto world. Earlier this year, a Maltese crypto miner was mis-sold an ASIC mining rig. After it turned out to be louder than expected, not to mention unprofitable. The miner took Dario Azzopardi – CEO 3 Group – to court and won the sum of €2,600 after Azzopardi failed to show. This blatant disregard for consumers on the “blockchain island” it further increasing tensions between citizens and government officials.

A Substantial Hack, Kept Quiet with Money

One of Malta’s most prominent and home-grown crypto trading platforms suffered a huge hack in the days leading up to the hack of Malta’s oldest financial services provider – Bank of Valletta (BoV). The crypto trading platform was abhorrently abused during the hack, losing all access to email accounts and having customer data stolen in the blink of an eye. The firm was left disabled and unable to operate for days following the attack.

Sadly, big money talks in Malta and the firm never notified the clients of the wide-spread data theft. Moreover, the Malta Financial Services Authority (MFSA) failed to issue any warnings about the data leak, hinting that the company involved has friends in very high places. It’s this attitude that brings a bad name upon the alleged blockchain island, and will ultimately lead to its downfall in the crypto world.

But, Binance is in Malta?

A number of big-name crypto exchanges, including Binance, flocked to the island in the days following the announcement of Malta’s new blockchain regulations, but no more have done so since. In Malta, foreigners setting up a business are only liable to pay 1% tax, whereas locals are shafted with the regular rate of 35%. Whether further tax incentives were offered to Binance and Bittrex in exchange for setting up an office on the island or not is still yet to be seen, but it’s rather fishy that no more exchanges have followed suit.

Malta’s days as the blockchain island are indeed numbered, and with very few merchants on the island actually accepting crypto it’s unlikely that this new government obsession will amount to much more than a distant memory. Perhaps it’s time the Maltese government took note from Bis-Serjeta and set up a blockchain garage to help blockchain startups get off the ground, rather than slapping them with crippling fees…