The smallest country in the European Union is to shortly beging a mock rollout of cryptocurrency, local media reported today, saying:
“The idea is that virtual currency would be introduced within a controlled framework to test proposed controls and legislation but without there being any bearing on the wider local economy.”
Details are very sparse, but Malta’s Prime Minister has expressed his aim to make the small but wealthy nation off the coast of Italy the “blockchain capital of Europe.”
The country of barely half a million inhabitants, which yet manages a yearly GDP of nearly $20 billion, is Europe’s gaming and gambling hub with the efforts seemingly strongly advocated by Gaming Authority chairman Joseph Cuschieri who said the country could no longer adopt a “do nothing” approach.
“We would like to be the first country to regulate crypto-currency and blockchain,” a spokesman to Malta’s Prime minister said.
This “sandbox test” of a codable money digital currency appears to be a first, with the results likely interesting for other nations and for this space.
But whether Malta can progress further is not clear in light of Mario Draghi’s recent comments. The president of Europe’s Central Bank said that no EU country could issue its own currency. Further adding that the currency of the eurozone is the euro.
It may be possible to tokenize or digitize the euro, so turning it into a state issued asset of sorts, but how that can be done is a difficult policy question being contemplated by many global central banks.
At the foundations of the dilemma lies the question of whether such state issued codable money should be accessible to all, or just to banks.
If the latter, then the benefits are likely very limited. If the former, then the asset or currency in effect becomes actual cash movable frictionlessly in a peer to peer manner.
That would mean central banks would give back some control to the free market. Cash, for example, makes it difficult to set a policy of negative interest rates whereby not only do you give banks your own money to lend at a fractional reserve, but you also pay them for the privilege of taking great risk with your funds, on top of the risk that they might go bankrupt and perhaps not give it back at all.
As cash becomes more and more rare, central banks may begin to think about how they can minimize systemic risks from their own unintentional and unseen miscalculations or misjudgments which can have considerable effects on the economy to the point of bringing it to even bankruptcy.
With blockchain based cryptocurrencies being a potential solution to return some balance between the private free market and the centralized planners so as to avoid a single point of system wide failure.
As of now, however, it’s not clear which country might show such foresight, with caution greatly prevailing. But Malta’s sandbox test appears interesting, not least because they recently announced the education ministry was to issue academic certificates through the blockchain technology, a world first at state levels.