Expert Insight

Blockchain island exchange will launch next year in Malta

Dennis Avorin explains how the new exchange will open on Malta which has been dubbed 'blockchain island' as a result of the government regulating digital ledger technology

The Mediterranean island nation of Malta made headlines throughout 2018 as the iconic ‘blockchain island’, being the first jurisdiction in the world to regulate digital ledger technologies.

The applications of blockchain technology are boundless and projects of all kinds within logistics, healthcare, energy and the financial sector are optimistic that they will help to improve human life across the globe by integrating immutable trust into the very code of the digital economy.

The first companies to benefit from the Maltese regulations that came into force in November this year are cryptocurrency exchanges, now in full swing to go live under the provisions of a regulated market.

Since cryptocurrency exchanges are currently operating in a legal vacuum, Malta has issued a 12-month transition period from when the law was passed until the exchanges must be fully licenced in order to continue to operate.

Transition period

The Chief Executive Officer of the Maltese financial regulator, Joseph Cuschieri, told the media that these exchanges need to abide by all the legal provisions regulating the sector and that during the transition period, must obtain a licence in 2019 in order to continue operating past November 2019, irrespective of when operations were first initiated.

“Once the law is in force, as a company you are obliged to abide by that law, even before you are granted a licence, Joseph Cuschieri said in an interview with Malta Today earlier this year. “If, on the other hand you are not granted a licence, then you can no longer operate in Malta.”

The new laws are quite stringent and are expected to deter dodgy operators, which is promising for the sector as it fuels consolidation and provides security for traders using the platform.

This point cannot be stressed enough in these times as the SEC has recently ordered selected ICOs to register as securities.

Going live

One of the first Maltese exchanges going live with its platform in January is ZBX, the European arm of ZB.com, which has a daily trading volume of 300 million EUR and thus files as one of the top five cryptocurrency exchanges in the world.

ZBX is headed by the former institutional trader Dave Pulis as the company’s CEO.

In a recent article for Forbes, ZBX is described as an exchange surrounded by “high expectations” as they plan to solve five well-known problems in the cryptocurrency sector.

First of all, ZBX is going to become one of the first fully-integrated cryptocurrency exchanges with a Maltese licence. The founders are stressing the importance of a secure platform and have made an effort to do things properly.

‘Big Four’ auditors

For example, ZBX will be audited by one of the ‘Big Four’ auditing firms. “This is a much-needed breath of fresh air for the industry and a big step in bringing the crypto industry on a par with the financial industry.” says Dave Pulis.

The technology used for the platform is built by the same people behind ZB.com, which has an excellent track record with no reported hacks since the inception of the exchange back in 2013. This makes it attractive for retail traders and institutional traders alike.

Pulis explained in the Forbes interview that it will feature a friendly user interface and institutional grade, low latency, co-located infrastructure with API access to deep liquidity.

There will also be zero fees for certain trading volumes. This recipe is clearly designed to attract as much liquidity as possible.

“ZBX will be one of the most liquid exchanges on the planet with liquidity shared among the ZB exchange family (ZB, ZBX and ZBG)”, says Pulis.

Stablecoins

ZBX Beta is already open for registrations, but it will not be yet open for trading until early next year. It accepts deposits and withdrawals in both EUR and USD, and also holds tradeable fiat pairs as well as stablecoins in both currencies.

Additional currencies are expected later in 2019, which is when ZBX expects to be licenced for STO listings: another attractive feature. 

The buzz around STOs has increased within the crypto space as the appetite for ICOs has turned downwards.

Stringent

As regulation on securities are far more stringent, STOs are seen as a more reliable opportunity for investors as well as a more secure funding vehicle for entrepreneurs given the current regulatory landscape surrounding ICOs.

Finally, ZBX is also aiming to build the world’s largest Over The Counter [OTC] desk. OTC transactions are known to be risky and have remained  contentious issue within the crypto space due to the large number of scammers and the lack of transparency.

ZBX seeks to counter this trend by offering to settle OTC transactions on its regulated platform with transparent procedures. Trading desks will be welcomed to open accounts on the regulated exchange so the issue of trust between buyers and sellers of cryptocurrency is resolved, which also breathes additional liquidity to the platform.

Solving all these issues, it undoubtedly is a reliable exchange to look out for as the New Year begins with regulated cryptocurrency exchanges racing to the top on ‘blockchain island.’

 

 

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