Why is Denmark richer than Ireland? This was the question posed by the Irish historian James Beddy in a research paper published in 1943. Beddy brought to attention the fact that Ireland had the benefit of all vital factors relating to agriculture in its favor when compared to Denmark. Yet Denmark, with a similar economy to Ireland, had a more developed industrial system, larger volumes of overseas trade, a lower national debt, higher incomes and a better standard of living.
As highlighted by the Swedish-Iranian economic thinker Nima Sanandaji in the book Debunking Utopia, Beddy posed this question long before the Nordic welfare state, often assumed to be the driving force of Scandinavian wealth, took hold. The answer to his question was the fact that Denmark had greater stability due to a compact social trust that exists in Nordic culture in general and has existed there since time immemorial.
Sanandaji has reinforced this point by comparing the per capita income of contemporary Americans of Scandinavian extraction with Anglo-Americans or Americans of German origin. The pattern is the same – so the welfare state is not the answer. The origins of Scandinavian wealth boil down to the exceptionally low transaction costs that follow from high levels of social trust embedded in their long-standing culture.
This brings us to the topic of blockchain. Blockchain, in its essential form, is a technology destined to automate social trust across the globe by cementing it into the very code of the applications that run our digital society. Without getting too caught up in the details, blockchain is a technology that carries the potential to increase wealth across the globe dramatically – simply by its inherent ability to create social trust.
Economic theory is confident of the fact that lower transaction costs increase wealth; regardless of how that wealth is eventually distributed. So it seems evident that everyone stands to benefit from blockchain technology. Except, of course, the intermediaries benefiting from the current low social trust predicament.
Malta, or as we like to say, Blockchain Island, has positioned itself as the spearhead of this revolution with the recent passing of three bills relating to the regulation of cryptocurrencies, blockchain and distributed ledger technologies. This marks another point in history where Malta takes the front seat, although not for the first time. Malta, for instance, also set the scene for the Malta Summit in 1989 where US President George H. W. Bush and Soviet General Secretary Mikhail Gorbachev declared an end to the Cold War.
The boom of activity on the island when it comes to blockchain is difficult to quantify. But if anything comes close to being another historical moment of the same magnitude as the Malta Summit, it is the launch of the Maltese blockchain regulations.
What is loosely referred to as the Maltese blockchain regulations are made up of three acts: The Innovative Technology Arrangements and Services Act (ITASA), The Virtual Financial Assets Act (VFAA), and The Malta Digital Innovation Authority Act (MDIAA).
The ITASA is designed to create the regime for the registration of technology arrangements, software and the technical infrastructure used within DLT, smart contracts and similar applications.
The VFAA is the act which provides the framework in which ICOs and cryptocurrency exchanges can operate. This act basically provides guidelines on how to properly classify DLT assets as either virtual tokens, financial instruments or virtual financial assets. In the case of financial instruments, these still fall within the scope of the Markets in Financial Instruments Directive (MiFID) and are to be licensed accordingly.
The MDIAA in turn, is an act establishing the new Malta Digital Innovation Authority – an organization specifically created to regulate the booming cryptocurrency and blockchain industries.
The peace of mind Malta offers to operators active in the DLT sphere has prompted both Binance and OKEx to relocate to the island. It was also recently announced that the first distributed bank, Founders Bank, is about to be set up in the country. How this will work out in detail, with regard to banking licenses and correspondent banking relations, is yet to be seen but it certainly adds to the excitement.
Personally, as a professional active in the blockchain space, I receive LinkedIn messages every week from companies seeking to relocate to the island to establish a base in this emerging global crypto hub.
The buzz is equally evident in the unparalleled enthusiasm for the upcoming Malta Blockchain Summit set to take place on November 1-2 of 2018. Three months ahead of the event, the Malta Blockchain Summit now estimates 5000 participants to flood the island in November.
As I have elaborated in this article, I believe the greatest potential of blockchain and DLT technology comes from its ability to create social trust. With this technology, social trust can be built on a much larger scale than the world has ever seen. It marks the beginning of a global transition, where transaction costs will most likely decrease and provide the underpinnings for a global wealth revolution.
The world today is moving quickly, so for once, it is satisfying to know that you are in the right place at the right time. For anyone enthusiastic about what the future will bring for blockchain technology, the place to be is Malta, the Blockchain Island.