In August 2018, the Malta Stock Exchange (MSE), through its subsidiary MSX plc, signed memorandums of understanding with two of the world’s leading crypto exchanges, Binance and OKEx.
The digital asset trading platform jointly owned and operated by the MSE and OKEx will be named OKMSX and is currently in the process of seeking regulatory approval from the Malta Financial Services Authority (MFSA). It is our hope that OKMSX will be licensed during the last quarter of this year.
This is a very exciting time for our country and the MSE, considering Malta is well on its way to becoming a leader in the blockchain and digital asset space. Dozens of blockchain companies have been set up in Malta over the last year, including Efforce, a company specialising in energy efficiency and co-founded by the legendary Steve Wozniak, co-founder of Apple.
The MSE is one of a handful of stock exchanges to move full force into the digitisation of traditional assets such as stocks, bonds, real estate, commodities and many other assets.
Showing immutable recorded ownership on a distributed ledger is the cornerstone of what blockchain is all about. Many mundane and time-consuming tasks, such as the payment of interest and dividends, proxy voting, beneficial ownership confirmation and many post-trader activities can be eliminated and simultaneously allow for real-time settlement.
Imagine selling shares and having the proceeds of the sale credited to your bank account only hours later, as opposed to the current three to five days.
The MSE is endeavouring to be a trailblazer in embracing blockchain technology. Although first mover bragging rights goes to the Gibraltar Stock Exchange (GSX), which last April announced regulatory approval to trade security tokens, the MSE hopes to not be far behind.
SDX, owned by Six Swiss, is currently testing its blockchain technology and hopes to be operational by the fourth quarter of 2020. Although most of the large global stock exchanges such as Nasdaq, Deutsche Bourse and the London Stock Exchange are developing, or have developed and tested digital assets trading platforms, none are operational.
Imagine selling shares and having the proceeds of the sale credited to your bank account only hours later, as opposed to the current three to five days
The MSE’s digital asset arm OKMSX will be modelled on the Prospects MTF ecosystem. Prospects MTF is a trading platform managed and regulated by the MSE and is aimed at helping small and medium-sized companies (SMEs) raise up to €8 million in capital.
OKMSX-admitted companies, like the Prospects MTF, will be required to utilise the services of a corporate adviser whose role is to not only assist in the application process but is also responsible for ongoing supervision. The corporate adviser should ensure that OKMSX-admitted companies are fulfilling their regulatory obligations and adhering to corporate governance best practices.
OKMSX will also utilise the MSE’s central securities depository (CSD). The OKMSX CSD will not allow individual account holders, only member broker nominee accounts. The Ethereum blockchain protocol will be used, and all security tokens will be held in hot and cold wallets. Initially, settlement will be possible only in fiat currencies.
The MSE has been chosen to host one of two prestigious conferences held annually by the World Federation of Exchanges (WFE). For the first time in the WFE’s 57-year history, Malta has been selected to host the WFE 37th Annual Clearing and Derivatives Conference, which will take place between March 27 and 29, 2020. A good portion of the conference’s programme will revolve around discussions relating to blockchain and its ramifications for stock and derivative exchanges.
Indeed, I believe one reason Malta was chosen to host this event was due to the leadership the MSE and our country have taken to promote blockchain and digital assets. Malta’s introduction of the Virtual Financial Assets Act last year, comprising three separate bills regulating virtual assets, was ground-breaking legislation which has cemented Malta’s name as the ‘Blockchain Island’.
Not only are we excited about the upcoming OKMSX project, but other collaborations are also bearing fruit. The MSE recently signed an agreement, offering CSD services to A Better Exchange (ABE), a digital asset securities exchange operating in 33 countries. We are also hosting a number of Fintech start-ups via our MSX Fintech Accelerator programme at our main premises in Valletta.
The MSE is proud to be doing its part to promote Malta as a leader in digital asset innovation. It anticipates and looks forward to many more blockchain and digital asset collaborations in the coming years.
Joseph Portelli is chairman of Malta Stock Exchange.
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