Expanding blockchain industry threatens Malta economy, IMF says

Posted 28 January, 2019

Malta keeps on holding the lead in terms of cryptocurrency and blockchain technologies implementation in the Mediterranean Sea region. Meanwhile, the International Monetary Fund (IMF) says the high-pace crypto growth in Malta can entail a serious threat to its economy.

According to the report prepared by the IMF experts, the higher number of financial companies, faster development of new products and legal environment, as well as a tougher situation in the labour market put significant pressure on the Malta Financial Services Authority, which operations are already affected by high criminal activity.

As a result, IMF designed a set of recommendations on the issue. Those recommendations are mainly focused on the financial sector, the housing market, the fiscal policy, and structural reforms.

IMF representatives say that the financial stability of the country is threatened by the high pace of the gaming industry development and the fact that the country trades citizenships for investments. Thus, the Malta government needs to stay vigilant and keep high standards of market control; otherwise, they will only keep on playing with fire, the IMF concludes.

With an increasing number of financial organizations that appear on the island, the IMF team notes Malta's government should monitor that crypto company fully comply with the AML requirements.

"The banking system remains well-capitalized, liquid, profitable and resilient, but faces some challenges. As interest rates remain low, profitability could suffer from increased competition from non-bank finance and heightened compliance costs associated with ongoing regulatory transformations”, the report reads

In 2018 in Malta adopted a rather loyal regulation for the digital assets market. As a result, the favourable environment allowed for the quick country development. In particular, many large crypto companies, like Binance, established its divisions on the island. 

For reference, last week the local regulator released notice warning of crypto market player about possible scam project.

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