Islands unchained : the case of regulating virtual financial assets in Malta

Abstract

This article connects island studies with the field of economic security focussing on virtual asset regulation for commercial activity related to cryptocurrencies in small jurisdictions. Malta is at the centre of this case study, given the heated debate, and criticisms, when it enacted the virtual financial asset act (VFAA) in 2018. Instead of accepting small island states as peripheral, risky and insecure “tax and crypto-asset havens”, the Maltese example highlights the legitimacy and competitiveness of licensing schemes for virtual asset business. A mixed method approach traces Maltese principles of virtual asset regulation in the proposal for a Directive of Markets in Crypto-Assets (MiCA) by the European Commission. The article concludes by emphasising the adherence of the Maltese VFAA to the rule of law and securing an emerging financial system. Avenues for future research include a comparative study of multiple small jurisdictions to create a taxonomy.