Please give us an overview of the current legal market in Malta and how any recent developments have impacted your practice?
The Maltese legal market is currently thrusting rather vibrantly, particularly in the blockchain and crypto
sphere, following the christening by parliament of a unique, non-intrusive and principles-based regulatory framework specifically regulating DLT platforms and virtual financial assets.
Malta is witnessing a huge bull-like market wherein many big players in the crypto realm are setting up shop and are seeking to obtain certification from the Maltese regulators to avail themselves of the bonding effect brought about by the higher standards and benchmarks propounded by the new laws and regulations. This recent development led to the formation of a dedicated blockchain legal team led by a number of partners across the firm.
What significant trends exist in the fintech market presently?
The most outstanding fintech niches which are setting up in Malta mostly relate to e-payment services, insurtech, DLT solutions, and capital raisings through the offering of tokens on a blockchain. The blockchain hype can also be noticed across a number of jurisdictions in the EU, although not as prominently visible as it is in Malta.
Another trending area is that of equity-based crowdfunding which is augmenting economic growth through new and increasing flows of credit to SMEs. In this vein, the MFSA has also recently introduced a tailored regulatory framework for investment-based crowdfunding (IBC) by publishing a new set of requirements regulating the operation of IBC services under the Investment Services Act.
What are the three biggest challenges to practising fintech in Malta?
One of the biggest headaches for small fintech businesses in Malta, and possibly in other countries in the EU, is that their profile may not fall within the risk appetite of most banks. This wary stance notably weakens their access to loan financing since the banking sector might not be acclimatised to the fast-paced growth within the fintech environment.
Another challenge is the risk of cyber threats, which, if not prevented and/or tackled well, might eventually drive investors back to more traditional forms of financial services. Being the smallest EU member, it is imperative that Malta employs better employment retention mechanisms so as to avoid the brain drain of valid employees moving from the regulator to industry.
How does fintech fit into the firm as a whole? Is it easy to collaborate with other teams?
GANADO Advocates has been at the forefront of fintech and blockchain developments on the island. We have been working closely with regulatory entities and industry leaders to become fully equipped with legal knowledge in this new sphere and we have also been heavily involved in the drafting of the recently enacted legislative framework. This shows that fintech is one of the budding areas which at our firm is given considerable priority.
The blockchain team has been active within the area from its early days, and has since been assisting clients, local and international, with blockchain based projects and cryptocurrency enquiries. Furthermore, the same team smoothly interacts and collaborates with other departments within the firm, especially on specific corporate, and employment matters as well as issues relating to investment services.
What advice would you give to the next generation of fintech lawyers?
The fintech space is a fast-changing environment, which is constantly presenting unprecedented and often mind-boggling dilemmas. Lately, fintech solutions are disrupting the conventional financial services scene in a rather aggressive manner and, in this respect, it is best for lawyers to widen their horizons and to try to understand at least the fundamentals of the underlying technology being utilised.
Frequent meetings with start-ups and tech entrepreneurs will help lawyers appreciate and grasp more the underlying dynamics of the fintech service or product. It is imperative for fintech lawyers to understand how the innovative technology has morphed the traditional legal rights and obligations of both users and service providers, to offer the best possible service to their clients.
What are your predictions for fintech in Malta over the next five years?
The incumbent Maltese government put fintech as one of its top priorities. While sowing the seeds to establish Malta as the go-to blockchain island, another potential market has already been pinpointed, which is that of artificial intelligence (AI). In a recent consultation paper, it has in fact highlighted the prospect of regulating AI solutions under the Innovative Technology Arrangements and Services.