Business 11 February 2019

Admir Aljic

Malta regulator addresses concerns over cybersecurity

Authorities in Malta are taking action after the International Monetary Fund (IMF) raised concerns that blockchain’s ascent in Malta will be a significant risk to the Maltese financial system.

According to the IMF, the growth of blockchain in Malta makes the financial system vulnerable to money laundering and the financing of terrorism. The IMF said that blockchain, along with the financial and remote gaming sectors combined with a high demand for citizenship-by-investment, poses a threat to the nation’s anti-money laundering efforts. The IMF has urged Maltese authorities to make sure companies dealing in cryptocurrency strictly adhere to anti-money laundering requirements.

In response, the Malta Financial Services Authority (MFSA) has just announced that it has launched consultations on cybersecurity with the aim of addressing the challenges that are associated with new technology. The MFSA says that it wants to “provide certainty in a complex digital world.” The consultation document, titled Guidance Notes on Cybersecurity, acknowledges the fact that recent advancements in technology such as distributed ledger technology foster innovation but these innovations also lead to new opportunities in cybercrime.

The document explains that a regulated decision-making body would establish and maintain a governance framework that would contain provisions as they relate to cybersecurity. The framework would comply with nationally and internationally recognized cybersecurity standards and the decision-making body would be responsible for establishing and maintaining appropriate governance, good conduct and policies relating to risk management.

The MFSA’s CEO, Joseph Cuschieri, said that this is a true commitment to reposition the MFSA as a “top tier European financial regulator.” Using a football analogy, Cuschieri said that Malta is playing in a local league but he wants the jurisdiction to move up to the Champions League, noting that new players, new tactics, and better facilities are needed to be among the best. Cuschieri said he understands that this is a lofty target but he believes it can be reached with the right investment and a change of mentality.

Cuschieri estimates that the MFSA will need to invest between €8 million ($9.06 million) and €10 million ($11.33 million) to upgrade the technology that drives the MFSA’s operations. The MFSA accounts for about 10% of employment in Malta and is responsible for 2,300 licensed entities.

Prime Minister Joseph Muscat stated, “The way the MFSA is looking ahead towards the future goes hand in hand with the changes taking place practically every day when it comes to technology and the way the financial sector utilizes these changes to make modifications on the way they operate.”

The consultation is open to the public, industry participants, and other interested parties until March 8, 2019.

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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