The launch of Bit-Pod - welcome to the club | PKF Malta

December 2017 saw a spectacular surge in the price of Bitcoin, and of other cryptocurrencies, which proliferated amid a craze for initial coin offerings (ICOs).

All this prompted a commensurate explosion in the number of stories and conversations 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 currencies) were heading towards more humble valuations.

Perhaps, this was one of the reasons why banks and monetary institutions are wary of the new challenges posed by the dawn of virtual currencies 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 billions of paper currency by Central banks aimed to calm the markets and wipe off excess liquidity in government bonds. Notwithstanding this volatility, holders of fiat currency hold no qualms to trust in its exchange value.

How does Bitcoin solve this trust dilemma? The answer is Blockchain technology deciphers the trust issue. One may remember the quote by Jamie Dimon, CEO of J.P. Morgan, that “Bitcoin is a fraud”. Recently, 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 cryptocurrencies.

The uniqueness of JPM coin is that unlike Bitcoin, it is not rooted in anonymity and its most immediate use is in international payments. When investors deposit money with J.P. Morgan, they can elect to be issued JPM Coins, which allow them to conduct transactions around the world quickly — no more waiting on wire transfers.

Readers may wonder why the local banks are so cautious of opening accounts for virtual currencies. This answer is that there is too much hype blaming the proliferation of such coins and the latent fear of cybercrime associated with them. The recent cybercrime incident that paralyzed Bank of Valletta international operations for almost 24 hours is reminder of the vulnerability of the financial 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 challenge? Do we have homegrown experts who are familiar 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 blockchain technologies. Practitioners need to become familiar not only with boundless VFA and AML regulations, but also trained in marketing, business development, operations, 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 jurisdictions 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 introductory public lectures conducted by MFSA. Be that as it may, it shows that there is a willingness among practitioners to invest time and effort to join the lucrative DLT bandwagon.

The government is being advised to take the bull by the horns and with the assistance of technical advisers, it enacted the Malta Digital Innovation Act together with a robust framework raising the bar when admitting qualified IT auditors. Quoting the prime minister, at a speech he gave to delegates attending 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 technology that USA tech giants pour billions of dollars annually in research and development.

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 Malta in launching the Bit-Pod concept. This is a meeting place for informal discussions among practitioners, engineers and DLT enthusiasts to network and discuss latest topics on the vast subject of this technology.

This is a non-profit organisation, where we help connect entrepreneurs (mainly start-ups) to people, programming engineers, and other resources across the DLT and virtual currencies domain. Whether you are looking to connect, learn, share, or work, PKF offers a selection of opportunities to network with other start-ups. This may help applicants wishing to scale the slippery slopes of licensing and running an ICO or a virtual wallet.

One augurs that participants in future The Bit-Pod activities will pave the way to build a stronger DLT ecosystem. This way the ambitious vision of the prime minister who stated that he will not stand for re-election will become a reality in time, before his successor is anointed.