Business 12 March 2019

Steve Kaaru

Malta appoints US security firm CipherTrace to check cryptos

Malta has recruited the assistance of an American cybersecurity company for its cryptocurrency industry. The blockchain island, as the country has come to be known, will be working with CipherTrace to track the cryptos that companies in the country process.

The Malta Financial Services Authority (MFSA) has been sorting through applications for virtual financial agents (VFAs). So far, 29 firms have applied for the license. If they receive the approval of the MFSA, they will be allowed to process crypto transactions in the country. They could operate in a variety of capacities including as crypto exchanges, wallets or ICO issuers. 

The VFA license will require that these firms be thorough in vetting their clients. Nevertheless, the MFSA will need to be on its toes and ensure they follow the regulations. This is where CipherTrace will be instrumental.

The San Francisco-based company was founded in 2015. Its founders had already begun assessing crypto and blockchain crime individually, before finally coming together and founding CipherTrace. One of its first financial backers was the U.S Department of Homeland Security Science and Technology. It now counts hundreds of customers, ranging from government agencies to some of the top banks globally.

The MFSA CEO believes that the partnership is just what Malta’s crypto space requires. In an era where criminals have sought solace in the anonymity that cryptos offer, regulators must step up their game. This is the first crucial step in that direction for Malta.

“CipherTrace Compliance Monitoring will provide the MFSA with powerful oversight tools to automate regulatory processes and audit the risk management of virtual asset businesses licensed in Malta,” he added.

The new system by CipherTrace will be applicable at both the pre- and post-authorization stages. It will cross-reference transactions with data from a wide range of sources including exchanges, wallets and crypto addresses. It will then begin profiling, from darknet markets to gambling sites to investment products.

The move will finally solve a challenge that crypto businesses have grappled with in Malta: access to financial services. While the country has generally been friendly to cryptos, banks haven’t shared the enthusiasm. This stems from the lack of a comprehensive regulatory framework.

Silvio Schembri, the Parliamentary Secretary for Financial Services, has been holding talks with banks and expects the situation to change soon. 

Note: Tokens on the Bitcoin Core (SegWit) chain are referenced as BTC coins; tokens on the Bitcoin Cash ABC chain are referenced as BCH, BCH-ABC or BAB coins.

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