Bitcoin and blockchain: two new words that have entered the vocabulary of finance. Malta’s government is aiming to be a bitcoin capital of the world, so it’s about time that we inform ourselves on what this entails.
In short, blockchain is a technology that makes cryptocurrencies possible, and bitcoin is a currently existing cryptocurrency.
The latter is a digital currency which is independent of central banks and central government. Cryptocurrency transactions are irreversible and one’s documentation and assets can be preserved within their digital platforms.
Given that they are not subject to state control, cryptocurrencies cannot be monitored by the police. It is hardly surprising, therefore, that they might be attractive to criminals such as money launderers who want to hide their financial transactions and assets.
Indeed, according to Europol, about three to four per cent of the €113 billion in illicit proceeds are currently being laundered through cryptocurrencies. Given that Malta’s reputation is being tainted with corruption, money laundering, sale of passports and sale of the common good, we should be worried.
In this regard, last May Prime Minister Joseph Muscat said that his Cabinet would make Malta the “Bitcoin continent of Europe”. In the months that followed, some media stories and commentaries were published regarding high-level meetings and intentions possibly related to this.
In the meantime, Digital Economy Parliamentary Secretary Silvio Schembri recently launched government’s plans for a consultation period on blockchain. Plans include the setting up of the Malta Digital Innovation Authority which will promote Malta as a hub for companies in this sector. How such companies can be regulated is a mystery which needs explanation.
The government has also announced that it will set up a national monitoring technology ethics committee composed of up experts in areas such as law, ethics, science, religion, human rights. Having experts monitor such activities can be fine, but again, it is unclear how government can regulate the sector.
Sure, the government can say that it is embracing the blockchain technology and not bitcoin the cryptocurrency. But the technology will be used by such currencies, which, again, cannot be regulated.
Cryptocurrencies may look attractive to those who like to speculate in finance, even though to me it seems that their only value is based on the idea that someday someone else will buy them. But can they be exchanged for real money? And should government encourage investment in sectors covered by real money, or in sectors that have found safe havens in cryptocurrencies? Will Malta become the global capital of money laundering and similar criminal activities through the government’s plans?
Another problem I see with bitcoin is that it has blind faith in technology, when a more realistic view would suggest that technologies are not neutral, nor are they infallible.
Malta’s public sphere has the duty to ask who is lobbying for the introduction of blockchain. We should know who the Prime Minister and other members of Cabinet have been meeting in this regard, and the government should back up its talk on regulation with clear evidence.
Let us keep in mind that very often policies have both intended and unintended consequences, and this happens even when legislation is watertight. In this case we are speaking of a new area with more questions than answers.
Indeed if things go wrong with blockchain, who will pay for the mess, and what role will Malta’s institutions have to safeguard the public interest? Sounds very much like other policies Malta is currently pursuing: the construction of everywhere, the sale of citizenship for cash, and so forth. They may look good in the short-term, but their sustainability is questionable at best.
I really hope that Malta does not end up with another Vitals or American University of Malta through the bitcoin promise. Surely, there must be other ways to find niches that can sustain our economic and social development.