Despite being one of the smallest nations globally, Malta has remarkably transformed into Europe’s equivalent of a Silicon Valley by successfully luring technology companies spanning a range of sectors, including SaaS, AI and blockchain-based innovations.
Crypto-specific regulatory turmoil experienced in various other nations has significantly benefitted Malta. For instance, with its stringent SEC-driven regulations, the United States has driven numerous crypto and token ventures to seek refuge in more favourable jurisdictions such as Dubai, Riyadh, Abu Dhabi, and Malta. The high cost of living in metropolises like London and Zurich also poses challenges for start-ups securing funding, even when the regulatory environment is more favourable.
In light of this, it’s evident that places like Malta, with their open and innovative approach to welcoming new businesses, are uniquely poised to emerge as centres for the rapidly evolving Web 3.0 and blockchain industries.
Because being an entrepreneur, especially in a new industry like Web3, is hard. The global statistics for entrepreneurs indicate that over 50 per cent of start-ups fail within the first five years and 90 per cent fail within 14 years.
Malta has shined in a landscape where many countries grapple with regulating blockchain assets for the burgeoning Web3 sector.
In 2018, the Maltese Commissioner for Revenue issued guidelines on the taxation of transactions involving distributed ledger technology (DLT) assets, adapting existing regulations rather than crafting new tax rules for cryptocurrencies.
In simpler terms, Malta classified DLT assets into two primary categories: ‘coins’, digital currencies without securities features, and ‘tokens’, further divided into ‘financial tokens’, similar to financial instruments, and ‘utility tokens’. This regulatory clarity attracted Web3 companies by providing transparent and practical tax guidelines, reducing uncertainty and promoting growth.
As Malta will start embracing MiCA regulations in 2024, there are many challenges and opportunities. If executed effectively, this alignment promises to offer regulatory support to the existing crypto start-ups on the island and, to some extent, level the playing field for less crypto-friendly European nations in their pursuit of fostering innovation.