- The crypto bubble of 2017 brought with it the concept of the ‘blockchain hub’, parts of the world where blockchain startups proliferated
- Malta, Estonia, and Switzerland all competed for the honor of being called a blockchain hub with regulatory changes designed to welcome startups
- How have these countries fared in their designs to be blockchain kings?
Blockchain hubs were all the rage in 2017 and 2018, with countries from all over Europe racing to make the most of the great cryptocurrency gold rush and play host to the new breed of startup. Among the pretenders were three who actually took legal and regulatory steps to try and make the dream come true – Malta, Estonia, and Switzerland. What happened to their blockchain dreams, and are they still worthy of the title of blockchain hub? Let’s find out.
The Mediterranean island of Malta was one of the first countries to throw its arms open to the blockchain world, with president Joseph Muscat frequently alluding to the nation’s steps to regulate and thus welcome the nascent industry.
However, after a promising start, Malta’s status as a blockchain hub has taken a severe knocking – the regulatory goalposts keep changing while the costs and the demands upon applicants increase, while Maltese banks are still reticent to allow customers to buy crypto with their own money.
Numerous blockchain companies have left the island, principally Bittrex and Binance, while others have been forced to shut up shop over the regulatory confusion – some 70% of firms that once gave notice of an intention to file for a Virtual Financial Assets license have now dropped their interest.
Once the poster child for the blockchain revolution, Malta is fast becoming a fading star that missed its opportunity.
The home of the e-residency, Estonia was seen as a leftfield choice for a blockchain hub, although the Ministry of Justice had been using the technology since 2012. In fact, huge swathes of the technology in the country is blockchain based, which made it less of a surprise when they moved to regulate crypto companies in 2017 and encourage them into the country, including relaxing finance laws.
As part of its blockchain hub ambitions, Estonia began to issue blockchain licenses to companies in the sector, handing out over 1,000 licenses from 2018. However, this benevolence has come back to bite Estonia after licensed companies were found to be using their license to “create credibility for some evil schemes” in the words of Madis Reimand, head of Estonia’s Financial Intelligence Unit, suggesting that the companies were a front for international money laundering.
The country has now conducted a crypto cull, with 500 losing their licenses and another 500 potentially on the way out. Not a good look.
Source: Julius Baer
Switzerland’s ‘Crypto Valley’, in the picturesque city of Zug, has been welcoming blockchain companies since late 2018 when the country relaxed its startup laws in order to attract them. Even before this Swiss banks had started offering business accounts to crypto companies to service the growing number of companies in the region.
The evidence of a Swiss Blockchain Federation, located in Zug, is evidence that the industry is going strong, although the federation recently said that 80% of blockchain companies in the country were at risk of immediate bankruptcy following the coronavirus pandemic.
Once a Blockchain Hub…Not Always a Blockchain Hub
It seems that Zug is the only blockchain hub that can still legitimately retain the title, assuming that it can overcome the strain put upon it by the coronavirus. Estonia and Malta seem to have ruined their chances of being the Silicon Valley of the crypto world, but there is plenty of time for them, or another country, to open its arms to the crypto world and take the title in the years to come.