The Government of Malta has repeatedly stated its desire to create an environment conducive to the development of the blockchain ecosystem, and have laid out what is amongst the most forward-thinking crypto agendas in the European Union.
But while it attempts to remove regulatory uncertainty around crypto, Malta is still exercising tight control over the businesses that establish themselves on the island.
Last week the government enacted three bills into law that are designed to encourage the establishment of legitimate cryptocurrency businesses on the island: The Virtual Financial Assets Act (VFA), regulating ICOs, cryptocurrency exchanges, and wallet providers, etc, the Malta Digital Innovation Authority Act (MDIA Act), outlining the duties and responsibilities of the Authority to ensure DLT platforms are credible, and the Innovative Technology Arrangement and Services Act (ITAS Act), which is concerned with the setting up of exchanges and other companies operating in the cryptocurrency market.
These acts reflect the high-level principles of the European Union, says Secretary for Digital Innovation Silvio Schembri, clarifying that although the island might be taking the lead in updating regulations, it is still exercising tight control over operations.
“We have also based these laws upon 3 basic principles – market integrity, consumer protection and industry protection […] The ultimate aim is to bring legal certainty to an environment that is currently unregulated,” he says.
As such, the regulations include measures designed to protect investors—including a prohibition on insider trading, market manipulation and misleading ads or ICO whitepapers. New companies raising capital through ICOs will be required to publish white papers that outline a detailed description of the entire project, and make their financial history public.
The EURS stablecoin
One early beneficiary of the supportive approach of the island’s government is Malta-based STASIS – which has recently launched the EURS, a stablecoin backed by the Euro.
According to STASIS CEO Gregory Klumov, the company hopes the EURS will bridge the gap between traditional finance and the crypto-economy. “While cryptocurrency trading is currently dominated by individual and retail investors, EURS will pave the way for institutional investors to enter the game and begin allocating capital—that’s what’s needed to take the industry to surpass the trillion dollar mark.”
The coin, which is already trading on the London-based DSX Exchange, is built on the Ethereum EIP-20 standard and STASIS says will be fully audited by a “big four” firm.
Perhaps learning from the perceived mistakes of Tether relating to audits and verification, Klumov says the EURS will undergo a “3-level asset verification process” consisting of weekly verification and daily statements, representing, according to STASIS, “the most rigorous and transparent verification process of any stablecoin currently available in the market.”
To guard against the fluctuations experienced by TrueUSD and Tether during market turmoil, Klumov says STASIS have also implemented a market-making algorithm that will steady prices across exchanges.
A gateway to institutional investment?
It is this level of governance combined with reputable Maltese government oversight that STASIS hope will help the EURS form an effective bridge between the worlds of traditional finance and crypto.
If it is indeed pegged to fiat currency and reputably-audited, the EURS should boost the level of institutional trust in the market.
The founder of EURS competitor, TrueUSD, echoes Klumov’s claim that stablecoins will be the vehicle enabling institutional investors to confidently enter the space
“As an audited stablecoin, the crypto provides a perfect way for traditional portfolio managers to enter the space”, says Tory Reiss, TrustToken’s vice president of business development
“If you’re a cryptocurrency portfolio manager, you know there is usually not fiat on cryptocurrency exchanges so if you need a cash position to move in and out of a token, it’s better to deploy capital from a stable coin sitting in your wallet,” he says, “and it’s not volatile like bitcoin.”