The Crypto Industry is Becoming Costly to Ignore

From the onset of the crypto industry, traditional financial institutions treated cryptocurrencies and blockchain technology with skepticism. However, the industry’s technology has evolved in just under 10 years, bringing disruptive products to the finance industry. Now, these centralized institutions can’t keep their eyeballs off the crypto industry as they scramble to learn how best they can leverage the technology for their operations. It is proving too costly to overlook the crypto industry.

Reluctant Institutions Waking Up

Most governments displayed arrogance regarding cryptocurrencies, some even banning them in their countries. However, some central banks have retracted and are exploring options for the technology. Some governments are keen on developing policies to create regulatory frameworks around the industry.

Top financial institutions including banks and other financial corporations often viewed the industry as volatile and one with too many risks not worth taking. Currently, corporations are speedily adopting blockchain technology. Some firms are setting up their systems to start accepting cryptocurrencies as payment. Others are investing in digital currencies as alternative sources of revenue.

Lately, publicly traded firms, like Tesla and MicroStrategy have invested in Bitcoin. Major banks like Deutsche Bank and BNY Mellon are adding cryptocurrency services to their operations. Payment processing firms, PayPal and Square recently added support for cryptocurrency services on users’ wallets.

Counting the Cost

Many institutions getting started on blockchain products may have reacted fairly late to the opportunities they would have had. Despite counting the cost of these missed opportunities, it’s better late than never for them.

Some institutions (and individuals too!) remain suspicious of cryptocurrencies, and they could miss out on even more opportunities that blockchain presents.

The crypto market has grown too big. Shrugging it off means several missed opportunities to decentralize your finance operations, expand your payment options, create decentralized applications among many other possibilities.

Cryptocurrencies are going mainstream and the time to embrace is now if you haven’t.

Top 10 crypto projects – Second Semester 2019

  1. BNB (Binance coin)

With the popularity that this issue has managed to address across the globe, it is expected that many people without knowledge of cryptocurrencies will begin to inquire about the best way to start investing, and one of the most prevalent thanks to the platform that supports it it’s the Binance coin.

Not only that when you take advantage of the platform you get a discount, but also the transaction fees are guaranteed, which is quite attractive.


  1. XRP (Ripple)

Although the price may look quite low, this does not define at all the characteristics that this altcoin can provide, due to its principle which works slightly different from the other cryptocurrencies.

Ripple was created to finance large institutions, and with the popularity recently taken in Asia large movements are expected.


  1. EOS

Although Ethereum has been highlighted as one of the altcoin with enormous technological advances, EOS has taken giant steps to make itself known in the market, with the ease of not necessarily possessing programming knowledge to understand the functions of it, together to the use of different tools and numerous other services.


  1. BTC (Bitcoin)

While you can hear predictions about possible declines in this altcoin, its popularity cannot be underestimated at all, being the most outstanding in the current market can bring great surprises throughout the second half of this year.


  1. XLM (Stellar)

This crypto has become quite important, both for its integration with smart contact protocols and also for the financial service with large corporations, there are quite a lot of expectations in this regard.


  1. IOTA

Being one of the well-known decentralized currencies in the market, there are expectations that IOTA can generate significant changes in the remainder of 2019, thanks to its scalability in transactions and that it is simply modular.


  1. ETH (Ethereum)

The top 2 of the most recognized crypto cannot simply be inconsiderate from this list, being one of the most invested by large blockchain institutions, its power in the market and in the different organizations and their hands subject to it make known what can contribute globally.


  1. LTC (Litecoin)

This is an interesting and one of the best long-term altcoins to invest. Litecoin is ready to become the next peer-to-peer payment facilitator, with the fastest and most efficient block processing speed that sustains impacted miners, this crypto has a much more decentralized work test algorithm than Bitcoin.


  1. XEM (NEM)

Not for nothing is it marked as one of the next peer-to-peer in payments and transfers, but NEM in its addition is generating quite a lot of noise in the Malaysian market, with its collaboration towards government institutions, security and technology, and its outstanding approach to business customers.


  1. TRX (Tron)

Recently, this altcoin has acquired BitTorrent, which allows the development of different disconnection methods in safe and decentralized torrents for the future. These innovations can facilitate the spreading of files over a network, and collect them for users to download.

The Malta Virtual Assets Act and Its Impacts in the Crypto Market

The crypto market is far from reaching its full potential. The Introduction of balanced and well-planned pieces of regulation could boost the growth of this new market by attracting institutional money and adding legitimization to the ecosystem.

Regulatory measures curb money laundry activities and reduce frauds and scams, therefore protect investors and safeguards market integrity.

On the other hand, increasing the complexity and the level of requirements necessary to run an Initial VFA offering may create barriers of entry for new players possibly negatively impacting the discovery and development of innovative technologies.

The Malta Virtual Assets Act:

The Malta Virtual Assets Act (VFA Act) came into force in November of 2018. The bill is part of a regulatory framework aiming to encourage the incorporation of innovative solutions in the field of blockchain technology to traditional financial services.

The regulations main objective is to provide a safety net based on three principles: investor protection, market integrity and financial stability. As well as stablishing effective preventive measures against activities related to money laundering and financing of terrorism.

The VFA Act refers to crypto assets as DLT assets and classify them according to following four different categories:

Virtual Token;

Virtual Financial Asset (VFA);

Electronic Money and;

Financial Instrument.

As the title suggests, the Act subjects the DLT assets classified as VFAs to its rules and guidelines.

A VFA can be described as ‘any form of digital medium recordation that is used as a digital medium of exchange, unit of account, or store of value’, ‘intrinsically dependent on, or utilises, Distributed Ledger Technology’. And does not fall under the definition of the three other categories of crypto assets mentioned above.

The Test:

The Malta Financial Services Authority (MFSA) formulated an assessment in order to determine whether a specific crypto asset qualifies as a VFA and therefore, should be issued traded under the provisions of VFA Act. The assessment is called the Financial Instrument Test (the Test). The VFA Act determines that ‘Issuers offering DLT assets to the public in or from Malta; and’ individuals performing any activity’ associated with DLT assets must defer to the Test.

The instrument may possibly mitigate the level of information asymmetry among the market players. The set of procedures and guidelines enclosed in the Financial Instrument Test brings transparency to the classification process. It also prevents potential misinterpretations concerning what lies within the VFA Act scope.

The regulatory scope of the of the Virtual Assets Acts encompasses the provision of services associated with Virtual Financial Assets and Initial VFA Offerings, also known as Initial Coin Offerings or ICOs.

VFA Services and Licenses:

The VFA Act determines that ‘no person shall provide, or hold itself out as providing, a VFA service in or from within Malta unless such person is in possession of a valid licence’ VFA Service Licences are of four different types, or classes. The level of requirements to have a licence granted depends on the level of complexity, risks involved, and the attributes of services intended to be rendered. The subsequent class includes the services listed on the preceding one. Thus, the Class-4 license encapsulates all the services foreseen in the Act.

Class-4 license authorises the rendering of any VFA Service, including the operation of a VFA exchange.

Class-3 license holders allowed to operate ‘deal for their own account’10and to provide the VFA services included in the Class-2 and Class-1 licenses. This license does not authorize its holder to operate a VFA exchange.

Class-2 license incorporates the services authorized for the Class-1, in addition to the following ones: ‘Execution of orders on behalf of other persons’, ‘Portfolio Management’ and ‘Custodian or Nominee Services’.

Class-1 Licence holders are ‘authorised to receive and transmit orders and/ or provide investment advice in relation to one or more virtual financial assets and/ or the placing of virtual financial assets.’12 This license does not authorise to keep or to manage client’s funds.

The introduction of a regulated licencing scheme works as defence mechanism against players associated with fraud, scam and illicit activities in general. Also, increasing or decreasing the level of requirements to hold a specific licence based on the characteristics of the services protects the market integrity and the investors.

The VFA Agent:

The VFA Act also introduces a new player into the crypto market field, the so called VFA Agent. The role of the VFA Agent is key for the engine supporting the Act.

The Act presents the VFA Agent (Agent) as a person:

‘registered with the competent authority under this Act and authorised to carry

on the profession of:

(a) advocate, accountant or auditor; or

(b) a firm of advocates, accountants or auditors, or corporate services

providers; or

(c) a legal organisation which is wholly owned and controlled by persons

referred to in paragraphs (a) or (b).

The VFA Agent role is to represent and to support the VFA Service provider in its interactions with the competent authorities. When applying for a license or submitting documents for approval, the process must go through the Agent.

The issuer of a VFA and a VFA Service provider must appoint a VFA agent. Applications and submission of documents The VFA Agent safeguards compliance with the Act provisions. The Agent shall maintain a transparent relationship with the competent authority and must notify any material information addressing lack of compliance.

Agents shall maintain cohesive mechanisms capable of assessing the suitability of potential clients. And ‘shall be required to be satisfied that the applicant is a fit and proper person to provide the VFA services concerned and will comply with and observe the requirements of this Act.’

Adding a middle man to any of economic relation is adding to the equation a greater chance of increasing transaction costs and magnifying price equilibrium asymmetries. Both impacting the innovation development on a negative way.

Initial Virtual Financial Asset Offerings:

The Initial Virtual Financial Service Offering (VFA Offering) is fund raising method where usually the goal is to collect capital to finance a project implementation. The issuer offers a Virtual Financial Asset in exchange for funding.

The issuer must prepare a white paper in accordance with the requirements of the First Schedule, Article 2 of the Malta Virtual Financial Assets Act. The white paper is the document prepared by the issuer that gives information about the project, products or services planned to be launched.

The white paper must be submitted to the competent authority prior the launch of the VFA Offering. The submission process shall be made through the Agent.

The issuer is responsible for providing clear and accurate information to investors and other stakeholders. Over all communication channels including advertising, website, press releases and the white paper.

Increasing the costs and the complexity of running an Initial Virtual Financial Asset Offering may elitize a tool that gives a more democratic access to investment opportunities. Worth to mention the negative impact this may bring to the pace of the technological innovation process. Vitalik Buterin, the genius behind the invention of the Smart Contract, ran his first fund raising attempt at the age of 19.  The first publications Vitalik made about his ideas were in the forum known as BitcoinTalk, no white paper and no regulations to comply with.

Source: VFA Act – Malta Financial Services Authority

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