Issue link: https://maltatoday.uberflip.com/i/1083753
maltatoday | WEDNESDAY • 20 FEBRUARY 2019 13 OPINION www.creditinfo.com.mt info@creditinfo.com.mt Tel: 2131 2344 Your Local Partner for Credit Risk Management Solutions Supporting you all the way George M. Mangion gmm@pkfmalta.com The writer is a partner in PKF, an audit and business advisory firm DECEMBER 2017 saw a spec- tacular surge in the price of Bitcoin, and of other crypto- currencies, which proliferated amid a craze for initial coin of- ferings (ICOs). All this prompted a com- mensurate explosion in the number of stories and con- versations about this new kind of money and about the blockchain technology behind it. The Bitcoin rally collapsed progressively at the start of 2018 and for most of the year Bitcoin (and other virtual cur- rencies) were heading towards more humble valuations. Perhaps, this was one of the reasons why banks and mon- etary institutions are wary of the new challenges posed by the dawn of virtual cur- rencies but like the internet which was resisted in its early days, the revolution is here to stay. Just ponder, how since the global banking system exited the gold standard, we run billions of transactions in fiat currency which are not backed by any intrinsic value – yet we trust in such paper currency. We know that following a string of quantitative easing in the EU and USA, the world has seen the printing of bil- lions of paper currency by Ccntral banks aimed to calm the markets and wipe off ex- cess liquidity in government bonds. Notwithstanding this volatility, holders of fiat cur- rency hold no qualms to trust in its exchange value. How does Bitcoin solve this trust dilemma? The answer is Blockchain technology deci- phers the trust issue. One may remember the quote by Jamie Dimon, CEO of J.P. Morgan, that "Bitcoin is a fraud". Re- cently, he changed his view when he announced his bank's own Blockchain-based currency, JPM Coin, making it the first major US bank to issue a coin. One may explain how JPM Coin functions very similarly to a stable coin, that is a coin that, while powered by Blockchain, is tied to an asset like the dollar. Instead of existing independently from State-backed currency, every JPM Coin converts to one U.S. dollar, effectively eliminating the sudden value swings in value of other cryp- tocurrencies. The uniqueness of JPM coin is that unlike Bitcoin, it is not rooted in anonymity and its most immediate use is in in- ternational payments. When investors deposit money with J.P. Morgan, they can elect to be issued JPM Coins, which allow them to conduct trans- actions around the world quickly — no more waiting on wire transfers. Readers may wonder why the local banks are so cau- tious of opening accounts for virtual currencies. This answer is that there is too much hype blaming the pro- liferation of such coins and the latent fear of cybercrime associated with them. The re- cent cybercrime incident that paralyzed Bank of Valletta in- ternational operations for al- most 24 hours is reminder of the vulnerability of the finan- cial world to hackers. But one swallow does not a summer make, and we cannot expect to become the Blockchain island in the Med, if we shy away from such attacks and hide in the corner. For a start, we ask ourselves – are we ready for the chal- lenge? Do we have home- grown experts who are famil- iar with the technology such as qualified MLRO, system auditors and IT engineers? As a nation, do we invest enough in R&D to create software to fortify our anti-cybercrime arsenal? Unless these human resources are in place, we are placing the cart in front of the horse. It goes without saying, that experienced engineers who've worked on cryptocurrency projects are in high demand, but in the meantime, we need more graduates with a keen interest in studying block- chain technologies. Practi- tioners need to become famil- iar not only with boundless VFA and AML regulations, but also trained in marketing, business development, opera- tions, customer support, and other job functions that the nascent sector demands. Start-ups do not flock to domiciles just because the tax is friendly or the climate is temperate, but choose juris- dictions where they are able to engage staff from a local talent pool across the entire organisation. It is some comfort to note that last November, over 300 practitioners sat for the VFA exam after attending four in- troductory public lectures conducted by MFSA. Be that as it may, it shows that there is a willingness among practi- tioners to invest time and ef- fort to join the lucrative DLT bandwagon. The government is being advised to take the bull by the horns and with the assis- tance of technical advisers, it enacted the Malta Digital In- novation Act together with a robust framework raising the bar when admitting quali- fied IT auditors. Quoting the prime minister, at a speech he gave to delegates attend- ing the Delta event last year, he has a vision to regulate Artificial intelligence (AI), the Internet of Things in an all-encompassing regulatory framework. In his mindset, Malta just about climbed the slippery slopes of Blockchain, and now is daring to scale the next mountain of AI – a tech- nology that USA tech giants pour billions of dollars annu- ally in research and develop- ment. Mindful of the legal and technical minefield that lay ahead, the MFSA called for experts to help design and draft parameters building a corruption-proof framework based on meritocracy and good governance. Therefore, it is opportune for PKF Mal- ta in launching the Bit-Pod concept. This is a meeting place for informal discussions among practitioners, engi- neers and DLT enthusiasts to network and discuss latest topics on the vast subject of this technology. This is a non-profit organi- sation, where we help connect entrepreneurs (mainly start- ups) to people, programming engineers, and other resourc- es across the DLT and virtual currencies domain. Whether you are looking to connect, learn, share, or work, PKF offers a selection of opportu- nities to network with other start-ups. This may help ap- plicants wishing to scale the slippery slopes of licensing and running an ICO or a vir- tual wallet. One augurs that partici- pants in future The Bit-Pod activities will pave the way to build a stronger DLT ecosys- tem. This way the ambitious vision of the prime minister who stated that he will not stand for re-election will be- come a reality in time, before his successor is anointed. George Mangion The launch of Bit-Pod - welcome to the club