AFTER ALMOST 10 YEARS IN BUSINESS, HEAD OF LEGAL AT E&S GROUP, DR ANTON JOHN MIFSUD, TELLS VANESSA CONNEELY HOW THE FIRM IS STAYING AHEAD IN THE LEGAL LANDSCAPE
While there’s no question that Malta has changed a lot in the past decade, one company has been working tirelessly to ride the ever-evolving wave. E&S Group is celebrating nine years in business this June. It started off with just two people on the ground and has grown to a staff complement of 35.
“I would describe it as a mid-size boutique firm,” says Anton John Mifsud, Head of the company’s legal department. “We try and service particular industries to avoid trying to do everything.”
And that model seems to be working. E&S Group is now composed of several departments, including legal, accounting, marketing, front office, as well as financial control.
“When the firm was first set up, there was substantial interest in spheres like foreign exchange. People wanted to open brokerage firms which would help people exchange their currencies. Today that level of interest has switched to cryptocurrency.”
“As we know, crypto wasn’t around nine years ago, but one of our main strengths is that we were one of the first firms in Malta that had an interest in this early on, and that gave us an edge over other firms. A few years ago, people were concerned and would say ‘while blockchain technology might be popular today, will it still be around tomorrow?’.” Dr Mifsud believes the answer is a solid yes.
“If you ask me, I think blockchain is here to stay, so for us, it was a wise decision to delve into this new area of law and try to be a pioneer in this area.” But he also has strong opinions about what needs to be done to attract more companies to set up shop in Malta, as well as ideas on how the country can sustain the level of growth it has been experiencing over the past decade.
“While Malta has been very innovative with its legal framework, it doesn’t mean that other jurisdictions aren’t catching up. So, we need to walk the talk on several fronts. First, there is the problem with our banking system. Clients find it very difficult to open an account, and the burden is entirely on the customer to disprove that they are not a criminal,” he asserts. “In the sphere of cryptocurrency, it’s even worse. Mention the word ‘crypto’ to some banks and they won’t even touch it as it’s outside their perimeters of risk. I can understand that for the smaller financial institutions it does seem risky, but when it comes to bigger banks, I find it hard to conceive. I can also understand if a bank says ‘no’ to potential customers at the end of a process, but not when it’s said at the start of a process. We end up looking outside of Malta for a banking solution.”
Dr Mifsud believes this unwillingness to take risks by some financial institutions comes from another challenge that’s plaguing many sectors across Malta: a skills shortage.
“Let’s face it, blockchain is a new technology and most of the best brains are taken up by the sector itself, so it’s very difficult for banks to beef up their human power to actually meet the demand from the industry.”
“Malta is a victim of its own success. It’s a small country and it doesn’t have the brain power to meet the demands. We’ve managed to attract some talent from outside of Malta, but essentially, we’re a small pool of professionals who are all competing for the best brains. We need to attract more ex-pats on better packages and start training people at university level in this sector. The short-term solution is of course to attract more talent from abroad, but in the long-term, you need home-grown talent.”
And supporting that education system is something Dr Mifsud does from within E&S Group. “A member of my team will complete one of the Master’s courses which is now on offer at the University of Malta. Even though we are in the middle of all this regulation and technology advancements surrounding blockchain, we understand that we still have to keep up to date. I can’t really advise a client about the sector, unless I understand the technology myself.”
Dr Mifsud also believes Malta needs to invest in several support services which surround the blockchain ecosystem. “For example, for systems auditors who audit smart contracts, there is a separate licensing process. This is not administered by the Malta Financial Services Authority (MFSA), but by the Malta Digital and Innovation Authority. Not everyone is aware of this,” he explains.
“Strengthening the number of people who are familiar with the industry will only serve the sector and the overall economy better. Otherwise we will end up in a situation of having a small number of service providers who are drowning in work, but when you are drowning in work, the quality may be compromised.”
Seeing the changes coming thick and fast over the past decade has allowed Dr Mifsud to fine-tune his skills when predicting potential challenges for the firm as well as its clients. And one aspect which he believes could be problematic, is the time it takes to set up a crypto-exchange here.
“The issue is the time to market. If you want to launch your business in two months’ time, I’m sorry but Malta is not an option. Some countries can grant a licence for a cryptocurrency exchange in one month. This can make them more attractive to investors.”
But despite the list of challenges Dr Mifsud says Malta is facing, he also believes it can remain competitive – especially since Government introduced the Virtual Financial Assets (VFA) Act and the Innovative Technology Arrangement and Services (ITAS) Act, which came into effect on 1st November 2018.
“Since the new law came into force last year, we’ve already seen a change. We are now receiving queries from higher-quality clients who are considering setting up business here. They like the fact that Malta has introduced more stringent checks and balances, and the industry is more regulated. It’s not easy to acquire a licence from the MFSA, and that carries weight in business.”
“At the moment, cryptocurrency companies are operating under a transitory period. While the law came into force on 1st November, those who were already up-and-running before that date have been allowed to continue under a transitory period, provided they apply for a licence by 30th October this year. I believe that once the first licences are issued by the MFSA, banks will change their approach, because essentially they will be dealing with a licenced entity which has gone through a very rigorous due diligence process.”
Dr Mifsud says that 95 per cent of the firm’s clients are from outside Malta, and while many are established in Europe, clients tend to hail from across all continents. “Here in Malta we have an added level of reputability when it comes to cryptocurrency because we did it first. So now we just need to stay ahead and maintain our level of credibility. The new law has had this benefit, because people who want to make a quick buck and disappear the next day won’t come to Malta. When you have a legal framework, you have legal certainty, and the first thing that anyone who wants to set up a new business would look for is legal certainty.”