Malta Is the Blockchain Island. What Does That Even Mean?
It’s no secret that Malta is bullish on blockchain. We’ve branded ourselves as the “Blockchain Island” and passed three bills supporting Distributed Ledger Technology in June. In a speech at the United Nations this fall, Malta Prime Minister, Joseph Muscat referred to cryptocurrencies as “the inevitable future of money.”
Malta is clearly trying to attract cryptocurrency businesses, and it’s working. Binance, the world’s largest cryptocurrency exchange, plans to open an office in Malta, and Binance CEO Changpeng Zhao has said that he’s close to a deal with local banks to enable deposits and withdrawals for a ‘fiat-to-crypto exchange’. Zhao told LongHash that Malta’s government had opened up a dialogue about crypto regulation.
Just last week, Malta hosted a crypto conference that attracted over eight and a half thousand participants from all over the world, even with DevCon and the World Crypto Conference going on at the same time.
Still, as a Maltese citizen working in blockchain, I don’t believe this makes Malta a true blockchain island, at least not yet. Right now Malta is more of a “blockchain regulation island.” We’ve taken a proactive approach and raced to enact the first DLT legislation in the world. It’s a historic feat, but we still have a long way to go.
A real blockchain island, in my view, is one where the technology is woven into the very fabric of life on the island and used for the good of its inhabitants. An island run on blockchain. A place where voter fraud is a thing of the past, digital identities are stored on decentralized ledgers, and government funding is indisputably transparent. Imagine being in full control of where and how your health records are used, for example. Life like that remains a blockchain dream for now, but if there’s ever a place where it could be realized, it’s on a blockchain island.
The Maltese government is interested in using the technology in the Lands Registry and the National Health Registries, which represents a great first step. How exactly this evolves remains to be seen. We’re not there yet, but it’s not our fault either. Blockchain technology has the power to be transformative, but present-day technology simply isn’t there yet. Blockchain is functional, but it’s not yet efficient enough for mass adoption. Lack of scalability and high transaction fees are still issues. The government, at least for now, cannot be blamed for not forcing the relatively immature tech on the private sector. Blockchain is still very young. It needs to be tried and tested before peoples' lives can depend on it.
While blockchain offers great potential, to become a “blockchain island” is not in and of itself a good thing. Blockchain does not necessarily equal transparency, accountability, and immutability, in the same way that the Internet doesn’t necessarily mean open, free communication and exchange of value. And while blockchain might help free some people from government control, governments can also use blockchain to consolidate their power. There’s a reason why countries like Russia, China and Venezuela are so enthusiastic about the technology.
Not all blockchains are decentralized and not all decentralized blockchains work in the same way. Blockchain tech could give greater control to centralized, corruptible, hackable authorities just as easily as it could potentially help stifle corruption, fraud and malpractice. Which kind of blockchain will Malta deploy? That’s not something you take a gamble on. It’s something the public should strive to understand.
Possibly the most frequently-cited example of blockchain being used for less-than-legitimate purposes so far has been the case of the Petro cryptocurrency in Venezuela. Amid the tragic economic collapses Venezuela has faced recently, which LongHash reported on here, their government launched a state-backed-cryptocurrency as a means of circumventing sanctions. Although the country is still in a desperate situation, Petro raised $735 million on its first day. Despicable to some, clever to others.
The darkest blockchain scenario, though, is more of a Stalinist dystopia. We’re witnessing the dawn of the programmable currency, and the possibilities go beyond raising capital through illegitimate means. Imagine if governments could monitor each and every transaction made with its own digital currency. They would have the ability to verifiably track who’s spending what, where and when. Maybe in some cases that’s already happening, but a nation-backed cryptocurrency would seriously up the ante.
Even worse: imagine the government could control where you could or couldn’t spend your money. Or creepier still, what if the government could switch off your money altogether? If China’s social credit system freaks you out, imagine tying it to a state-controlled cryptocurrency where your account could be frozen if you behave badly.
With the rise of private blockchains, governments could sell us on the promise of blockchain and then assume complete control over it. Apply that to voting at election time and you’ve suddenly got an incredibly serious issue on your hands.
Does this make blockchain a bad thing? Of course not. Nuclear energy can be used to power cities but it can also be used to blow them up. Just as so many celebrated Facebook’s power to liberate us from dictators, now people are lamenting how bad actors can use social media to manipulate elections. Technology cuts both ways, and we’ve got to keep our eyes open as the next digital revolution begins to take hold. With a technology as complicated as blockchain, however, that’s much easier said than done.
How many people would actually pay attention to the details if the government were to launch a national cryptocurrency? How many people would actually understand the code? How many Maltese know what the bills on Distributed Ledger Technology even entail? Malta’s making moves to educate people through the recently announced Blockchain and Distributed Ledger Technologies Centre at the University of Malta. However, this will likely only cater to a select few, and the majority of Maltese still won’t have the first clue on what’s happening with blockchain implementation.
So, Blockchain Regulation Island is where we stand now. Malta is implementing laws that attract big players like Binance, and that’s not a bad thing as long as we see this as a first step and not a final destination. Focusing only on regulation, and not true adoption, would represent a lack of trust in the technology that has become our country’s brand. We’re on the road to somewhere -- whether it’s toward a regulation haven, a blockchain dystopia, or an actual blockchain island remains to be seen.
Max Thake is co-author of Das Krypto-Jahrzehnt and Head of Marketing at Advanced Blockchain AG.