With its ambition to position itself at the forefront of digital finance, Malta has caught the attention of online brokerage and trading platforms. Cryptocurrency exchanges, including industry heavyweights Binance and OKEx, have opened offices on the island, and in collaboration with the Malta Stock Exchange, they are exploring opportunities to set up two new exchanges for security tokens. The first online brokers that came to Malta were forex and CFD brokers; these retail-oriented platforms saw their business grow on the back of easy-to-use technology. While the introduction of tighter checks on systems and risk controls, as well as tougher capital requirements and leverage limits for forex companies, has curbed growth, the measures are seen as important in retaining investor trust. As the brokerage and trading industry enters the next phase of its evolution, consumers and companies are increasingly viewing a licence from the Malta Financial Services Authority (MFSA) as a real seal of quality.
Digital Asset Trading Hub
Regulation is playing a pivotal role in further developing today’s increasingly digital trading systems, providing transparency and legal certainty. As part of its regulatory package for Distributed Ledger Technologies (DLTs), Malta introduced the Virtual Financial Assets (VFA) Act, which sets a defined framework for ICOs, tokens, cryptocurrencies, and the operation of cryptocurrency exchanges, which are referred to as VFA exchanges. Malta introduced four types of licences for companies providing services related to virtual financial assets, whereby crypto exchanges require a category four licence which is issued by the MFSA.
Malta is now gearing up for the next iteration of digital asset trading, and the Malta Stock Exchange is positioning itself as the ideal venue for the trading of security tokens. To realise its ambition, the exchange has teamed up with Binance and OKEx, and the two token exchanges are expected to be up and running by the end of 2019. Some commentators say this is the first signal of a radical market transformation, which will see the stock exchanges of the future host unified platforms where one can trade traditional financial assets, such as securities, shares of stock and bonds, as well as crypto assets, including security tokens, equity tokens, utility tokens, cryptocurrencies and stablecoins.
Aside from its regulatory advantage, Malta’s strength as a location for brokerages and exchanges is based on a strong desire to provide an optimum operating environment. The country is the largest European hub for iGaming companies. Thus, the technical infrastructure that fintech companies require is already established. Malta has developed a growing cluster of data centres with 24/7 support services. Systems are designed for high traffic and have ample redundancy. International connectivity is guaranteed via sub-marine fibreoptic cables to mainland Europe.
Future growth depends on the sector’s ability to win investor trust. Malta’s EU-compliant regulatory framework gives investors confidence, peace of mind, and the added comfort of knowing they are trading with a company that is licensed and adheres to high regulatory standards. Industry analysts also have high hopes that institutional investors will take up digital asset trading in the coming years, which would catapult the sector into the mainstream.