Malta had started on a path that could see it become a pioneer in the blockchain and crypto industry. With Blockchain Island, the country tried to attract firms in the space through an intricate mix of progressive regulations and an enabling environment. However, recent statistics have shown that the project didn’t entirely turn out the way many had hoped.
More Rejections for Regulatory Licenses
According to data published by the Malta Financial Services Authority (MFSA) last week, about 70 percent of the companies that passed through the first phase of the Blockchain Island application process ultimately failed to get licenses.
The Authority received about 340 applications for its Blockchain Island initiative as of last year. However, it hasn’t issued one license yet, and the steam for the project appears to have run out. In the new release, the agency published the names of 57 companies that had failed to receive licenses in its latest review round. One of them was the Palladium Exchange, a digital asset exchange service owned by Maltese insurance and asset management firm Crypto Capital.
Palladium had worked on an initial Coin Offering described as the “world’s first convertible ICO.” Essentially, investors could purchase the tokens and convert them to Palladium shares at a later date.
The firm’s plan was to raise about $160 million, 50 percent of which it would invest in a European bank. It would then use another 35 percent to develop its exchange. However, it would appear that all of that is on the rocks for now.
The MFSA also confirmed that 257 of the 340 initial startup applicants are now in unknown waters, as only 26 startups are still contenders for the application process. Most of the companies left are crypto exchanges.
A Flawed Implementation Process is Dooming the Project
In an interview with industry news source Decrypt, insiders explained that while the country had built a lot of ambitious initiatives in preparation for the island, the application process became too expensive. The regulatory environment also didn’t particularly help matters.
Leon Siegmund, a board member of Malta’s Blockchain Association and founder of Bitcoin Club Malta, explained, “The regulation in Malta came out of a mindset of technocracy, rent-seeking, and EU-obedience. Exactly the opposite of what’s needed.”
The problem with Blockchain Island appears to be its flawed implementation. When it was launched in the summer of 2018, the Maltese government went on to approve the Digital Innovation Framework, which consisted of three acts: the Digital Innovation Authority Act, the Innovative Technological Arrangement and Services Act, and the Virtual Financial Asset Act.
At the time, Malta had begun to hail itself as a leader in the crypto space and firms started trooping in – including Binance, the world’s top crypto exchange.
Still, the fact that none of these firms had been licensed soon started to cause issues. Maltese banks refused to work with crypto firms in the country, as they explained that the partnerships were above their risk appetite. Still, more firms rushed in – all of them without licenses.
Soon enough, the problems began to build. Malta required 10,000 euros for a pre-application for the VFA license, and the country went in line with the European Union’s AMLD5 regulations. The government soon started to have problems with its companies, including and especially Binance, over their regulatory status.