Issue link: https://maltatoday.uberflip.com/i/1058684
13 maltatoday | WEDNESDAY • 5 DECEMBER 2018 BUSINESS OPINION George M. Mangion gmm@pkfmalta.com The writer is a partner in PKF, an audit and business advisory firm WITH the onset of Blockchain technology there is disrup- tion. Soon, the world will greet a proliferation of Artificial Intelligence which empowers robotics, machine-learning and Blockchain systems that make verification by auditors and registration of certain tra- ditional contracts redundant. Readers may be jolted by this assertion and think that this prediction is nothing but scare-mongering. Yet, the way Blockchain technology is structured is said to revo- lutionise the method how re- cords are kept and maintained. Naturally, having all data in Blockchain may close doors for certain professions but proudly open vacancies for cybercrime busters even though in theory hackers cannot access data through a central point of vul- nerability, on the understand- ing that Blockchain networks are nearly impenetrable. This may be the case, yet the con- centration of data in distribut- ed centres attracts cybercrime. Cybercrime's footprint is increasing each year both in its sophistication and frequency. Traditional defence strategies such as hardening of firewalls and intrusion prevention systems are no longer suffi- cient. Away from the curse of cybercrime and its nucleus of nefarious hackers, let us focus on the positive side. The onset of Artificial Intel- ligence (A.I) coupled with the power of machine-learning will open new horizons in the next decade. There is no deny- ing that it is a complex and ever-changing technological context. This interaction will be highly productive in creat- ing new business opportunities which will be baptising the fourth Industrial revolution. One may question why the fuss about Blockchain. Cer- tainly A.I techniques are not new, although we are hearing about them as they are becom- ing more mainstream. Follow- ing the birth of internet, twenty years ago we have seen and waited quietly for the next mir- acle in business development. It has arrived with the debut of Blockchain and its deriva- tives nine years ago. Many are purporting this to be the next miracle since the design of the ubiquitous steam-engine. Taking the bull by the horns, Malta was quick to embrace the revolution and has prom- ulgated laws to regulate it. But the eco-system is still in the initial stages. For Malta, the drive for diversification of economic pillars is a good thing but this quest needs to be fully funded and supported by stakeholders. Obviously, to do this we cannot gild the lily and expect the green shoots to appear after the first rain. The MFSA and FIAU are circulating for consultation with practitioners a tail of rules. These rules place heavy onus on practitioners before accepting Blockchain clients and holds them responsible as subject person to report to FIAU any suspicious transaction within three days of its occurrence. There are other rules reining the governance of VFA agents and issuers, making them fully responsible to monitor clients before they are accepted to vet any business that may poten- tially lead to money laundering or financing of terrorism. The licence fees payable to become an accredited agent or an is- suer are not cheap when com- pared to other jurisdictions. Making this an exclusive club, reflects the way how authorities are raising the bar. Every firm needs at least three officials with a pass in an exam (apparently patronised by Institute of Management in tandem with a law firm - Ga- nado Associates) as a prerequi- site to become accredited as a VFA agent. Last month over 300 candid- tes sat for the exam but only a small percentage managed to pass. Certainly, starting on a high note will help the authori- ties shift the chaff from the wheat and avoid the apologetic story when licences granted to three local banks, ended up being investigated for alleged money-laundering activities. Another ingredient for the success in this sector is the attraction of technical advis- ers assisted by a number of crypto-friendly banks. The latter are conspicuous by their absence. Therefore, together with an eminent platform of rules, the government is expected to help in upgrading the levels of computer science and maths in schools. Quality education is the building block of future gen- erations of IT savvy students. Having raised the legal founda- tions to regulate Blockchain one must maintain momen- tum by recruiting more IT staff and A.I experts within the regulators. Anything less will fail – it is like opening a grand pub with no beer. It goes without say- ing that more funds are need to multiply the efforts in our university to research machine and quantum learning. It was a bold step when Malta decided to become a crypto and Block- chain hub in Europe and rightly so, government has sponsored a mega conference – Delta – to help promote this vision. This has put Malta on the map and attracted the atten- tion of giants such as Binance, Okex and BitPay. To help broaden the path for new business PKF Malta visited the headquarters of the Social Good Foundation Inc. in Tokyo, Japan – a company whose ICO raised an impres- sive $30 million from overseas private institutional investors. This foundation is headed by Soichiro Takaoka. and is using A.I to conduct research in the investment industry. Simply put, it consists of algorithmic trading in which results are improved by ana- lysing a variety of big data to discover investment targets, such as shares that are likely to increase in value. The founder of Social Good Foundation says that it aims to become the Amazon or Rakuten of the Blockchain era. Soichiro Takaoka has an impressive biography. Having graduated B.A in Tokyo Uni- versity, he started his career at Mitsui & Co., Ltd, where he was engaged in Overseas Investment Review, New Busi- ness Development, and M&A in the IT business sector. Soichiro was engaged in overseas investment review, new business launches, and M&A in the information industry sector. He formed the Ayumi Trust Group (formerly the Abraham Group) in 2005. This is an IT media business pioneer, targeting the wealthy class. He then established and managed a Hong Kong securi- ties company licensed under HKSFC (later sold). Readers may ask, 'What is the secret of success of Social Good?' The answer is that it holds funds in reserve so as to maintain the value of the cryptocurrency and establish credibility. The novel idea behind this cryptocurrency is that it allows the holder to re- ceive cashback when shopping at participating stores, part of which is automatically donated to charitable organisations. The Foundation submitted its business model patent ap- plication regarding a cashback system utilising cryptocurren- cies in Japan and the United States early this year. At the end of April, the number of Social Good holders has surpassed 30,000 people worldwide. The image of Social Heart is one of a neutral fund rating organisation; it is positioned to use big data to carefully select superior funds worthy of long-term invest- ment by the wealthy from a huge volume of fund data. If Malta can lure such mega- asset managers given that it has enticed giants such as Binance, then one augurs that more Blockchain platforms are persuaded to weigh their anchor in our sheltered crypto harbour. As always, fortune favours the bold. George Mangion A Blockchain marvel discovers Malta's solid regulations Having all data in Blockchain may close doors for certain professions but proudly open vacancies for cybercrime busters even though in theory hackers cannot access data through a central point of vulnerability, on the understanding that Blockchain networks are nearly impenetrable