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Malta’s banks not as ‘crypto friendly’ as first thought

Malta has become a leading hub for crypto startups – marketing itself as a go-to destination for blockchain businesses looking to capitalize on the country’s pro-crypto stance. Nonetheless, many crypto businesses are struggling to open bank accounts, and new guidance from the IMF may make that process even more difficult.

Malta’s openness towards cryptocurrency and blockchain innovation combined with its lax banking laws and crypto-friendly regulations has led to the country being dubbed ‘blockchain island.’ A large number of crypto startups, including leading exchanges Binance and OKEx, have located themselves in this jurisdiction.

Driven by Prime Minister Joseph Muscat’s push for Malta to become a leader in blockchain technology, the Maltese government passed three crypto bills in 2018, titled "The Innovative Technology Arrangements and Services Act," "The Virtual Financial Assets Act," and "The Malta Digital Innovation Authority Act," to provide the legal framework to attract blockchain companies to the island nation.

Malta is also home to one of the largest global blockchain conferences, the Malta AI & Blockchain Summit, which attracted over 8,500 delegates in 2018, and has championed one of the first euro-backed stablecoinsEURS. The island also has its own Blockchain Malta Association, which is the country’s most influential blockchain advocacy group.

Crypto startups struggle to open bank accounts

Despite Malta’s push to become the go-to hub for all things blockchain, it has not been all sunshine and roses for crypto startups on the "blockchain island."

According to a report by the Times of Malta, crypto startups that have incorporated in Malta have struggled to open business bank accounts. Despite the government’s desire to attract as many blockchain companies as possible, several Maltese financial institutions have been reluctant to provide these businesses with bank accounts as many of them are outside of their "risk appetite." Sources say cryptocurrency-focused startups especially, as opposed to pure-play blockchain companies, have had issues with local banks.

Parliamentary Secretary for Financial Services, Silvio Schembri, told the Times of Malta that a number of banks have been hesitant to provide banking services to crypto startups that have not yet received an MFSA license to operate as a Virtual Financial Assets (VFA) Agent.

In the last five months, 28 companies have applied to become VFA Agents under the Virtual Financial Assets Act but are still waiting for approval.

IMF urges Malta to improve its AML/CFT procedures

Interestingly, the Times of Malta has reported that despite the evident difficulty of crypto startups opening bank accounts in Malta, the International Monetary Fund (IMF) has urged the Maltese financial regulator to tighten banking regulations further and to increase oversight

"Malta’s openness to financial flows makes it vulnerable to ML/TF risks (money laundering and terrorist financing). Increasing inflows, including from countries generally considered to pose greater ML/TF risks, may exploit vulnerabilities in the banking sector, real estate, remote gaming, virtual assets, and the IIP," the IMF stated in its report, which was prepared at the request of the Maltese government.

"To strengthen bank supervision, the MFSA should take timelier supervisory actions, increase the frequency of onsite inspections, make more use of monetary fines as part of the sanctioning regime, and ensure supervisory action is not delayed through judicial appeal," the IMF recommended.

How the Malta Financial Services Authority (MFSA) will respond to the findings in the report and to what extent the regulator’s future actions may affect crypto and blockchain startups is still unclear. However, if the MFSA acts on the report, it will likely not become easier for crypto companies to open bank accounts. More paperwork and regulatory hoops to jump through are potentially in the cards for crypto startups looking to incorporate in Malta.

10 percent of Malta’s GDP from blockchain by 2027

According to Malta’s National Blockchain Strategy, the island nation aims for 10 percent of its GDP to come from its local blockchain industry by the year 2027. While this may sound ridiculously high, it is important to note that 12 percent of the country’s GDP already comes from its online gambling industry, which has found a home on the island away from strict regulations in most of Europe.

To hit this GDP target, however, Malta still has a long way to go. The road map to make this happen includes several proposed public sector blockchain initiatives including a blockchain-powered e-residency program and a smart governance solution for crypto startups.

While Malta may not yet be the "Crypto Utopia" it is often painted as in the media, it is doing everything in its power to attract as many blockchain companies to the island. Blockchain advocates and the pro-crypto government will have to work closely with regulators, financial institutions, and the industry to ensure that the country’s blockchain openness remains while not increasing the risk to consumers or opening the door to unsavory characters.

For now, Malta remains one of the best locations for crypto and blockchain startups that want to ensure that they can operate without the fear of a changing regulatory framework that could adversely affect their business. However, that does not mean that red carpets will be rolled out for every crypto startup that arrived on the island, especially when trying to open a bank account.


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