In the last half of 2018, Fintechs raised a record $62 billion in investment globally. Despite 2018 being the torrid time for cryptocurrencies, blockchain – the underlying technology behind cryptocurrencies – had its best year ever both in terms of money raised and in number of deals.
These developments matter for Malta, as it sets out to attract foreign direct investment in fintech and blockchain as evidenced by the efforts of Finance Malta, and the highly publicized positioning of Malta as Blockchain Island.
Malta’s ambition is not in doubt, but its banks are now an acknowledged barrier in the way of turning aspiration into realisation, At a well-attended recent meetup organised by the Open Payments Cloud in Lija, these challenges, along with potential solutions were explored.
Maltese banks’ reluctance to serve blockchain businesses generally and cryptocurrency businesses in particular stems from two legitimate concerns:
- Firstly, the banks rely on international card scheme and banking relationships to operate their vital role in trade. Wavecrest’s much publicized loss of its Visa license in 2018 in relation to its cryptocurrency customers is a cautionary tale, and should correspondent banks restrict their services, then not just the Maltese bank will be impacted but also all their business customers that rely on access to international payments.
- Secondly, the banks have neither the expertise nor the tools to understand and manage the risks associated with the blockchain / crypto sector, and it would therefore be foolhardy to get the exposure.
As for how these challenges might be resolved, the following were highlighted:
- It’s just a matter of time – the banks will gain familiarity and will become bolder at supporting such businesses. Time, however, is exactly what Malta was hoping to gain.
- New banks are being set up – such as Roderick Psaila’s RnF – to take advantage of the opportunity left untapped by the incumbent banks – the question however is whether such banks can navigate the fine line between becoming pathbreakers or pariahs.
- Platforms – such as the Open Payments Cloud – are being designed to provide safe operating spaces for banks and innovators – for fintech broadly as well as blockchain – to collaborate.
The Open Payments Cloud aims to collaborate with both established and emerging banks to help enable the financial innovation ecosystem that Malta’s bold vision deserves.