Virtual asset deployment in small island states : the case of Malta

Abstract

Since the inception of virtual assets, regulatory approaches by small island states have been marginalised and discredited for enabling the blockchain industry. Without being formally connected to the discourse on small states as financial centres, the literature on virtual asset regulation has reinforced the narrative of risky, secretive and vulnerable societies to financial crime. This research counters this narrative in the case of Malta. Despite its self-proclamation as blockchain island, Malta is proven to be competitive and compliant with EU law. For challenging the narrative of Malta being labelled as 'tax haven' in the EU, the case of Malta is analysed multidisciplinary. A three-phased mixed methods case studies was undertaken to test Malta' compliance with EU legislations on anti money laundering and combatting terrorist financing in respect to the 2018 introduced virtual financial asset framework. The theory-driven hypothesis testing was undertaken by the methods of text mining, keyword queries and qualitative data analysis, which examined Maltese acts and EU directives as documents. Eight pieces of legislation were coded and determined that the Maltese DLT framework complies with EU AML legislation and is competitive because elements of Maltese governments were traced in the proposal for a directive on Markets in Crypto-Assets by the European Commission.