MITLA publishes its response to the DLT Regulation consultation process
The Malta Information Technology Law Association (MITLA) has published the Response Document it has submitted with respect to the Consultation Document entitled ‘Malta a Leader in DLT Regulation’ published by the Parliamentary Secretariat for Financial Services, Digital Economy and Innovation within the Office of the Prime Minister, in February.
Generally, MITLA views the Consultation Document and the attempts to place Malta in the lead of the adoption and recognition of DLT and related technologies and applications as laudable as this presents an opportunity to ensure that sustainable innovation is at the core of Malta’s vision.
However careful attention must be paid not to over-regulate the foundational technological architecture that is still relatively embryonic. Doing so would risk jeopardising or stifling the effects and/or impact that such technologies may bring as well as related inbound investment in the area.
The ability of the law to regulate (if at all) technological innovation is a very delicate subject and should be based on a clear understanding of technological neutrality in law, amongst others.
Blockchain needs the law to flourish and grow but challenges exist in applying current hierarchical regulatory models to a decentralised technology architecture. Any Maltese approach venturing into regulating blockchain should be cognizant that, similar to the Internet, such technological regulation needs to appreciate the international dimension in which it exists as this would ensure that any Maltese initiative would end up creating a national silo which would counter the benefits that early-adoption can bring.
Most importantly, Malta has to factor into the European equation of regulating the blockchain especially in light of the recent announcements made by the European Commission, including governance (as opposed to strict top-down regulation), the forging of common blockchain technology standards, the proposed fintech regulation action plan and others
The salient recommendations contained in MITLA’s Response Document are:
1. Resist temptation to set up overly complex hierarchal authorities. Favour polycentric as opposed to traditional regulation. In general terms: governance principles are more desirable than regulatory burdens.
2. Ensure active participation in EU and international standardisation efforts including the EU Blockchain Observatory and ISO, amongst others.
3. Focus on Offchain Equivalence, implementation of practical vertical use cases as opposed to technology/architecture regulation.
4. Implement ‘Recycle Box’ legislative exercises. Apply ex post not ex ante regimes.
5. Provide a predictable, minimalist, consistent, and simple legal environment and revise the applicability of current rules to enhance legal certainty.
6. Drive blockchain adoption through sandboxing and public sector applications as well as incentives. Increase national R&D efforts and foster incubation of ideas and acceleration of start-ups in this sector.
7. Promote, even through minor legislative interventions, the adoption of Hybrid Smart Contracts with a possibility of Government leading by example with immediate effect.
8. Restrict discussions on legal personality (if at all) to decentralised autonomous organisations.
MITLA will remain available and eager to engage in discussions with the authorities and relevant stakeholders regarding the high-level conceptual comments provided in its Response Document.
The Response Document is accessible here: MITLA DLT Response Document FINAL mar2018
