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Malta: The world’s first blockchain-regulated country; The Liechtenstein Blockchain Act; Gas prices crippling Ethereum.


by Ilias Louis Hatzis



Ilias Louis Hatzis
Ilias Louis Hatzis
The Blockchain Bitcoin & Crypto Weekly CXO Briefing is all you need to know, each week, jargon free for CXO level business leaders and investors who will use this technology to change the world. Each week we select the 3 news items that matter and explain why and link to one expert opinion.
For the intro to this weekly series, please go here.

Story 1: Among Blockchain-Friendly Jurisdictions, Malta Stands Out

Decrypted: As countries, regions, even cities are considering regulation for cryptocurrencies, the Maltese Falcon is flying high in the crypto world.
Malta’s Cabinet approved the Virtual Financial Assets Bill, that provides the regulatory framework for Cryptocurrencies and Initial Coin Offerings. Malta’s cryptocurrency and blockchain regulations establish the country as world’s first blockchain-regulated state, with clearly established regulatory frameworks for blockchain, ICOs and digital currencies.

Our take: As of July 4, Malta has become the first country in the world to provide legal certainty to cryptocurrencies.

Over the last few months, the Government of Malta has been working with private parties, across various sectors, locally and internationally, to identify the changes in their legislative and administrative framework that are required to accommodate blockchain and cryptocurrencies.

The bills in question are the Malta Digital Innovation Authority Act, the Innovative Technological Arrangement and Services Act, and the Virtual Financial Asset Act. The new laws regulate various aspects of the crypto industry and govern the compliance of crypto-based enterprises with the existing regulations.

• The Malta Digital Innovation Authority (MDIA) Act that is to provide for the establishment of an Malta Digital Innovation Authority, in order to support the development and implementation of the guiding principles to promote consistent principles for the development of visions and skills relating to decentralized technology, and to exercise regulatory functions.
• The Innovative Technology Arrangements and Services (ITASA) Act will provide for the regulation of designated innovative technology service providers and certification of technology arrangements that will be exercised by the Malta Digital Innovation Authority.
• The Virtual Financial Assets (VFA) Act focuses on ICOs and the regulation in respect of certain service providers like brokerages, portfolio managers, exchanges, traders etc., which will be involved in activities related to ICOs.

The Malta Stock Exchange announced earlier this month it will be accepting up to twelve fintech startups to join the MSX Fintech Accelerator, an ecosystem aimed to create and support the wider blockchain scene. Presumably, more applications will be accepted in the future, should the project continue. If the accelerator and the regulations are successful and show promise for Malta’s future in tech, we will likely see other small nations hungry for new revenue opportunities following suit.
In March 2018, the Binance cryptocurrency exchange announced that it will be moving its headquarters from Hong Kong to Malta, due to more strict regulations on virtual currencies in Asia. Following Binance, OKEX announced that it will be expanding to Malta. OKEx is a leading digital asset exchange, that offers token-to-token and futures-like trading.

Japan, South Korea and Hong Kong host multiple exchanges and Asia-based investors are a large chunk of global trading. After last year’s crypto crackdown by China, Japan took a crypto-friendly stance that’s been challenged by theft and fraud, and while authorities are still open to digital currencies, they have stepped up their scrutiny of exchanges. Regulatory uncertainty in South Korea and Hong Kong may put them at a disadvantage, especially if Malta gains in popularity.
Maltese regulators have been very forward thinking, redefinng basic assumptions about finance and economics, and finding ways to accommodate blockchain and crypto into legislative and regulatory frameworks.

All in all, it’s an exciting time and these new developments will certainly continue to put Malta firmly on the crypto map. Malta has set a very bright example, as its trying to pull the center of the crypto-trading world to the west. Basically, by providing the tools so that companies in this sector can operate, the Government of Malta is said to the world, if you operate in the cryptocurrency business then Malta is the place to setup shop. Malta has opened floodgates to massive inflows of capital to island.

Story 2: Liechtenstein’s Blockchain Law, Crypto Banking and ICOs, Interview With Prime Minister

Decrypted: Many countries inside the European Union are still struggling to come up with clear regulations that would provide a predictable set of rules for cryptocurrency businesses. However, smaller nations like Liechtenstein and Malta have sorted it out.

In March, Liechtenstein Prime Minister Adrian Hasler, proposed "The Blockchain Act", a set of new laws and a careful regulatory framework for the blockchain industry.

The law will not only regulate the tax, spending, and issuance of digital currency, but also create advantageous conditions for new fintech businesses. The law is intended to regulate all activities that are possible on technical systems such as distributed ledgers and blockchain systems, and thus provide legal certainty

Our take: Liechtenstein is a little nation between Switzerland and Austria. A bank account is not needed to launch a company in Liechtenstein, and its possible to use Bitcoin (BTC) or Ethereum (ETH), instead of fiat money.

The Liechtenstein government has a defined strategy towards fintech and is very supportive to companies that want to start a business. As regulation is an essential topic, the Financial Market Authority in Liechtenstein has set up an internal competence team, the “Regulatory Laboratory”. This team deals with regulation and innovation in the field of financial technologies.

Also at the start of 2018, the Liechtenstein government put a new banking legislation in place to make the financial market even more attractive to fintech businesses by lowering the entrance barriers. Fintechs can now apply for a specific banking license which complies with the European regulatory framework, thus guaranteeing access to the European Economic Area, including the 28 European member states as well as Norway and Iceland.

According to a comprehensive list compiled by Coin Dance, Bitcoin is unrestricted in 107 countries, but is illegal in at least 10, including Bangladesh, Bolivia, Macedonia, Morocco, and Qatar. Also, penetration is still very small. A recent survey found that only 8% of Americans have invested in cryptocurrencies.
The main issue that is keeping most away, is the lack of regulation. The United States and the European Union are standing on the sidelines. Without a clear indication of what the future of the crypto economy is going to look like, many investors don’t want to enter uncharted waters. This barrier to entry has a clear solution: regulation.

Countries that want to benefit from the growth of blockchain over the next decade, need to regulate. Too many regulations can kill any market, but I think that in order for cryptocurrency to fulfill its future promise, regulations are not only needed, they are inevitable. While the big guys are still ambivalent, small-sized jurisdictions understand and that are doing exactly that. While their need to be a competitive is driving their regulatory efforts, at the same time its setting an example of what every other country around the world should be doing.

Story 3: Ethereum Founder Proposes Solution For Stabilizing Gas Prices

Decrypted: In a paper that was released on the 2nd of July, Vitalik Buterin, the founder of Ethereum, talked about the issue with the present system, by which miners are reimbursed for their work, and how this process can be improved.

Our take: Growing gas prices have been a big problem for Ethereum, creating difficulties both for users and miners. Now ETH users may specify the amount of gas they are willing to pay for a particular transaction. But they do not have incentives to set the price higher than the average, which means that transaction may fail.
The congestion of the Ethereum network is the result is a disproportionate rise in the price of fees for each transaction, with delays and failures. All this without an actual increase in the total number of transactions.

At the current state, Ethereum and Bitcoin give buyers the opportunity to choose the prices that they are able to afford. The prices also includes the fee, making it easier for buyers to ultimately choose a rate that they are comfortable with. The trouble with this method though is that there is no motivation to post fees higher than the average rate, which may mean that the transaction does not always go through.

The Ethereum gas limit, which is the number of data that can be stored in each block, is dynamic. This means that the miner can modify it, allowing more transactions per second, but such an approach can reduce security.

Vitalik Buterin made a proposal to improve the stability of the gas price market, adding that the proposed model :"One proposal for improving stability and user-friendliness of gas price markets: Not dependent on Casper, sharding or abstraction; if well reviewed and people agree it's a significant improvement, it could technically be implemented as a change to mainnet."

Today, almost every blockchain platform utilizes a technique that is equivalent to a first-place auction, where miners submit their individual bids and if they are included, they pay what they bided.

In theory, the introduction of uniform price auctions, charging each participant of the same price as that paid by the lowest bidder, could be a way out. This could be great for the Ethereum community, and could help to increase the value of the coin further.

Ethereum, the second most valuable digital currency based on market cap, is trading at $480. The digital currency has a market cap of $48 billion and a trading volume of $1.28 billion over the past twenty-four hours.

Ilias Louis Hatzis is a Blockchain entrepreneur who writes the Blockchain Bitcoin & Crypto (BBC) Weekly CXO Briefing each Monday.

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Vendredi 13 Juillet 2018
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