Issue link: https://maltatoday.uberflip.com/i/1114702
09.05.19 10 INTERVIEW Blockchain ... the beginning Justine Scerri Herrera is a warranted Maltese lawyer currently specialising in the blockchain and crytpocurrencies sector, specifically in relation to advising clients (Issuers and Service Providers) on products, activities and licences related to the new Maltese VFA (Virtual Financial Assets) regulations. MASSIMO COSTA As a lawyer, how did you become interested in blockchain? Four years ago I was a lawyer study- ing for a Master's in the Netherlands, in global criminal law, and one of my sub- jects had to do with cybercrime. Subse- quently, I decided to focus on jurisdic- tion in cyberspace for my thesis, and while writing it, I came across the word "Bitcoin". I started doing research on the topic, and found out about things like the Dark Web. When I graduated, I be- gan working as a lawyer in the criminal area and then investment and banking. Later, I heard that the Maltese govern- ment was discussing blockchain, and I realised I was knowledgeable about the subject. Eventually I decided to quit my job and dedicate myself full-time to researching and writing about the blockchain area. Last October, I managed to land a job with my current firm, AMK Advocates and Legal Consultants, where I set up a Virtual Financial Assets (VFA) depart- ment. What does your work in relation to blockchain consist in? Are they many lawyers working in this sector in Malta? Regarding the number of lawyers in this sector in Malta, a handful have applied for a VFA agent's license. Any- one who wants to regulate or apply for certain cryptocurrency or blockchain related activities and licenses locally must appoint a VFA agent. erefore one needs a VFA agent's licence in or- der to service clients in this sector. With the new business opportunities and the new laws on blockchain, lawyers have seen a window of opportunity to branch out. In terms of my work, roughly 40% of my time is spent reading and writing about crypto and blockchain and par- ticipating in international conferences – it's essential that one keeps constantly updated in this rapidly evolving area. e remaining 60% of my time is spent servicing clients who deal in the block- chain and cryptocurrency ecosystem. rough our services, we contribute to building a secure regulated infrastruc- ture for these players and ensure that they operate in a compliant manner. What do you feel is the potential of blockchain, apart from cryptocurrency? What can it be used for, concretely? Cryptocurrency works on blockchain – it is its underlying technology – but they are not one and the same, since blockchain has many functions and uses. Blockchain is a distributed public ledg- er working on a decentralised network. It was originally intended for Bitcoin – the most famous cryptocurrency – but other potential uses within the technol- ogy, which is public and transparent in nature, subsequently emerged. rough blockchain, the middleman in financial transactions basically be- comes redundant – there is no need for him. One major potential transform- ative use applies to capital markets. When it comes to integrating this tech- nology within capital markets, we are in the initial stages of a something big. One of the major uses of blockchain is for security tokens in capital markets. A security token involves the tokenization of traditional securities, which are then traded and recorded on the blockchain. In this regard, blockchain does away with middlemen such as clearing hous- es and banks. Another important use of blockchain is in supply chains, where, through the technology, tracking is possible, so one can ensure that a good or service has arrived at its destination or has been delivered. Something to keep in mind is that, just because blockchain is a good technolo- gy, it doesn't mean it is useful for every business. If a business' system of cen- tralised ledgers is getting the job done well, then that company doesn't need to use blockchain. Why is it so important to regulate blockchain? Over the past months and years there have been a lot of scams and hacks when it comes to blockchain, and mon- ey has been lost. In Japan, for instance, an exchange operator has had over $500 million in funds stolen from it by hack- ers. ese episodes highlighted the fact that the sector needs to be regulated. Unfortunately, for various reasons, 90% of ICO (initial coin offering) pro- jects have failed, which has given the in- dustry a bad name. I believe that if 90% of those 90% decided to take the reg- ulated route then such projects would have stood a better chance of being suc- cessful. Regulation protects investors (token buyers), maintains market integrity and validates the industry. Moreover, these technologies need to be audited and certified, because, if the technology is flawed, then the product is flawed. Will regulation help counter the criticism that the technology can be used for illegal purposes, such as money laundering and terrorism financing? Money laundering, unfortunately, will always take place somehow, be it through complex offshore structures, corrupt banks or smuggling large amounts of cash by sea. Unfortunately, it will happen through crypto too. If you look at cryptocurrencies, some are anonymous and some aren't It's a misconception that Bitcoin is anony- mous, because governments and police forces have now found ways to trace the source behind Bitcoin payments, using public addresses on the blockchain. e possibility to launder money and conduct illicit activities also applies to traditional financial services. It is more about having the proper policies and procedures in place to prevent illegali-