The International Monetary Fund (IMF) is of the view that the growth of blockchain in Malta has created some significant risks in the island’s economy. This is according to a report by local media outlet Times of Malta.
Blockchain growth poses money laundering and terrorism risks to Malta
According to the report, the IMF revealed its finding after visiting the island. The monetary body pointed out that blockchain, alongside financial and remote gaming sectors and the government’s citizenship-by-investment scheme, concerns them. They believe that the technology could violate the anti-money-laundering (AML) regulations.
The Maltese government recently put in place three pieces of legislation covering blockchain and cryptocurrencies as they aim to make the island attractive to crypto and blockchain investors. Prime Minister Joseph Muscat is a fan of cryptocurrencies and believes they are the inevitable future of money. He also vouched for blockchain technology which he believes will have a transformative impact in virtually all parts of our lives.
The IMF has however advised the regulators in the country to ensure that crypto service providers follow the AML requirements. The monetary body admitted that the regulators had implemented a series of sound measures. However, the Financial Intelligence Analysis Unit in the country was urged to do more and block the loopholes in the system.
Accordingly, IMF recommended that regulatory bodies should apply more sanctions and boost their understanding of possible risks and regulatory breaches in the sector. The IMF team voiced concerns regarding capacity restraints. It warned that “The increasing number of financial entities under supervision, the rapid development of new products, the evolving regulatory environment and the tightening of the labor market have put the Malta Financial Services Authority under considerable strain.”
IMF notice lapses in other sectors
The IMF team also identified some issues with the real estate market, labor shortages, and strained infrastructure in the island. Despite that, they believe that Malta has recorded favorable growth and will continue to do so.
Malta has become one of the leading crypto-friendly countries in the world. The IMF had previously advised the country not to issue a national cryptocurrency due to money laundering concerns.
The IMF, however, seems to be warming up to cryptocurrencies. In November, IMF Deputy General Counsel revealed that the body is devoting a lot of attention to fintech, with special emphasis paid to the blockchain. IMF managing director Christine Lagarde also pointed out that central bank issued digital currencies could play a role in the future of the global economy.