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Some 60 billion euros of cryptocurrency and other virtual assets passed through Malta after it first advertised itself as “the island of the blockchain”, while controls were still seen as lax.
Malta has since strengthened its regulatory framework for cryptocurrency, but this significant volume of transactions during the country’s initial push for crypto activity has been flagged as ‘problematic’ by global experts examining Malta’s anti-Maltese regime. money laundering.
On Tuesday, Financial Action Task Force assessors met in Paris and discussed whether to put Malta on a list of countries that are not doing enough to stop serious financial crime.
It is understood that Malta’s swift approach to attracting digital currency platforms to the island before the necessary laws were put in place was among the red flags facing the country.
Sources said Maltese authorities have insisted the industry is now tightly regulated, while championing its cause. They also argued with the FATF that this figure represents only 2% of global annual transactions.
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Government sources said key members of Tuesday’s FATF meeting criticized Malta, pointing to structural shortcomings, particularly in the island’s law enforcement regime.
Although the number of criminal prosecutions for financial crimes has increased, not enough of them have been considered major cases, sources close to the confidential FATF meeting said.
A number of other members of the meeting, the sources added, acknowledged that Malta had indeed adopted a broad package of reforms aimed at eradicating major money laundering.
Malta’s first year of blockchain dreams quickly turned into the Wild West
The sources said one of the issues raised repeatedly during the meeting was that Malta had facilitated the exchange of a large volume of cryptocurrency and other virtual assets without sufficient oversight.
Cryptocurrency is a digital payment system that does not depend on banks to verify transactions.
Instead, it uses a peer-to-peer system to verify authenticity. This poses transparency issues as the system could potentially be used by those seeking to disguise holdings and financial transactions from regulators or tax authorities.
The crypto craze in Malta
Virtual assets and cryptocurrency were all relatively foreign terms in Malta until Joseph Muscat’s labor administration announced in early 2017 that it intended to take the crypto world by storm.
In 2018, at the height of the blockchain island hype in Malta, several big names in the cryptocurrency exchange world announced that they would be moving here in anticipation of a new set of laws. .
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Many of these companies have started operating in a limited space, unlicensed, as a generous ‘transitional period’ of up to one year has been authorized by Malta.
At the time, industry sources told The Times of Malta that the first year of Malta’s blockchain dreams quickly turned into the ‘wild west’. A senior regulator had said authorities were facing an explosion of high-risk transactions carried out by cryptocurrency exchanges in an unlicensed environment.
Some international surveys had even placed Malta at the top of cryptocurrency trading volumes during this regulatory vacuum.
Malta’s precipitous dive into risky cryptocurrency has drawn a warning from the European Commission on the need for proper regulatory and enforcement controls.
In July 2018, the government passed laws providing a regulatory framework for companies operating in the cryptocurrency and blockchain industry.
The three bills establish a regulatory framework for cryptocurrencies, blockchain, and distribution ledger technology.
That same month, the MFSA warned blockchain-based companies that they had to wait before they could apply for approvals and permissions in the country.
In the months that followed, the major operators who had helped generate much of the hype by announcing their move to Malta quietly slipped away.
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