Malta took the bull by the horns and forged ahead in the sensitive area of virtual currency trading when virtual currencies were at their peak (Bitcoin peaked in 2017 at $20,236) even though larger countries such as China and India, and EU countries, were banning it. But, of course, it is all a matter of the early bird catching the worm.
This year, Bitcoin is making a shaky climb closer to the $4,000 mark, while the entire industry of cryptocurrency is still reeling from hitting relative new lows. Needless to say, six years ago the ECB was rather sceptical of virtual currency schemes, seeing the glass half-empty rather than half-full. It is to be expected that any conservative banking regulator would take a cautious approach to virtual currency, but the community has learned some lessons from the painful birth pangs of the sector.
There are a number of early devotees who, with luck and foresight, became rich on holding Bitcoin. Others were less fortunate. Certainly, market observers hope that last year was only a year of correction and that from now onwards we will see a rally in the sector. A recently published A.T. Kearney report predicts that: "By the end of 2019, Bitcoin will reclaim nearly two-thirds of the crypto-market capitalisation as altcoins lose their lustre because of growing risk-aversion among cryptocurrency investors."
Nevertheless, the novelty that appeared 10 years ago in Japan will not fade away so easily. Last year, Malta began to toy with the novelty of the blockchain technology - one that gave birth and support to virtual currencies - and passed a number of laws to regulate the blockchain and its derivative services. As is always the case, the ECB, banks and monetary institutions are wary of the new challenges of virtual currencies but, in the same way that the internet was resisted in its early days, the crypto revolution is here to stay.
Just ponder how, since we left the Gold Standard, we run billions of transactions in fiat currency that are not backed by any intrinsic value yet we blindly trust such paper currency. We know that, following a series of quantitative easing practised in the EU and the USA, this exercise has led to the printing of billions worth of new paper currency by central banks to calm the markets and wipe off excess liquidity by buying government bonds and other securities. It is all a matter of trust. Some may ask how blockchain technology can resolve this trust dilemma. The answer is that blockchain deciphers the trust issue. Typically, we ask ourselves five questions: Do we really trust the intermediaries? Do we trust credit cards? Do we trust that transactions represent real value? Do we trust banks? Do we trust our government? Without going into the controversy that may arise from the answers to some of these questions, we can do a reality check by saying that if and when cryptocurrencies become mainstream, then trust peaks. We have all heard about BitCoin, Ethereum and other coin variants that currently form part of a popular framework, yet there are many others.
Having just about exploited the celebrity of blockchain, Prime Minister Muscat was euphoric in his New Year message saying, inter alia, that now we must switch our sights and try to scale the mountain of Artificial Intelligence (AI) - a subject into which, in the USA and China, we find technology giants pouring billions of dollars annually into research and development. Mindful of the legal and technical minefield that lay ahead, the government formed a committee of experts to help design and draft parameters leading to a safe framework and good governance in the field of AI.
It is an open secret that the government is keen to be seen helping innovation and would like to see Malta become a jurisdiction that attracts talent from all over the world. Readers may ask how virtual currencies can become mainstream unless Fintech is attracted to Malta since, at present, banks do not support Bitcoin - although efforts are in the pipeline to attract newcomers. It is a classic situation where governments tend to put the cart before the horse and then later, thanks to practitioners, they go the extra mile to correct the position.
PKF Malta is committed to making an investment towards embracing Blockchain in Malta. The investment will be made in developing Bitpod, which will function as a quasi-lab, comprised of a live project dedicated to fuelling research and development with a special accent on the emerging fusion between technology and the financial world.
On the subject of distributed ledger technology (DLT) and PKF's commitment to invest in this, the writer is of the opinion that DLT and virtual financial assets will play an important role in the VR experiment. The Bitpod experiment will include a technical publication by the end of the year, which will be made available to the public, leading to a compilation of the findings, observations, conclusions and results. In addition to the Bitpod, complementary Bitblock sessions will present a series of ad hoc working sessions in a casual format, once again aimed at provoking thought, ideas and novel discussion with local as well as international patronage.
In conclusion, the importance of honing and harvesting research and development in an international forum cannot be stressed enough in our national ambition to service a centre of excellence, within the advancing realms of robotics, AI and all forms of revolutionary living.
We have the intention and we now also have the law, but we still have a long way to go before we can confidently say we also have the coveted working ecosystem. PKF commends the good work and investment being done by the Government and encourages the private sector to follow suit on this remarkable journey that promises to make its mark indelible.
George Mangion is a senior partner of an audit and consultancy firm and has over 25 years' experience in accounting, taxation, financial and consultancy services. His efforts have seen that PKF has been instrumental in establishing many companies in Malta and placed PKF in the forefront as professional financial service providers on the Island.