Malta, noted a recent Deloitte report, has established itself as an attractive jurisdiction of choice for the (particularly alternative) funds industry. Drawn by an innovative yet robust regulatory environment, attractive tax regime, and low fund set-up and ongoing operational costs relative to other EU jurisdictions, Malta has become home to a range of funds, fund managers and asset servicing providers, “offering a versatile range of investment structures and fund products,” it said.
And the financial centre has ambitious plans for the future, as illustrated by the sessions at the 16th annual FinanceMalta Conference, held in mid-September this year.
Growing Malta’s ‘FinTech Village’ ecosystem into a thriving hub is a key part of those plans.
Last year McKinsey ranked Malta’s FinTech sector among Europe’s top performers, describing it as an unexpected pocket of strength. Activity now spans the financial services space, with multiple firms focused across crypto/blockchain, payments, neo-banking, investment and trading, and RegTech.
A government-led initiative in collaboration with the industry is seeking to drive further innovation, promote existing companies and attract more start-ups using the pillars of governance, support, funding and expertise to strengthen Malta’s ‘FinTech Island’ badge.
Blue and green economies
The “blue economy” offers another area of opportunity. A recent World Economic Forum article pointed out that the shipping industry transports roughly 90% of global trade. But as one of seven hard-to-abate sectors, decarbonisation is both essential and difficult.
As the conference session description observed, financial services will be central to mobilising capital, managing risks, fostering innovation and supporting the sustainable growth of the blue economy. “By aligning financial decisions with environmental and social considerations, they can help create a more sustainable and resilient ocean-based economy.”
Malta, as an EU member, financial centre and leading registered shipping domicile, is well-placed to participate in this transition.
Ditto the green economy. The session on ‘ESG, Achieving Net Zero’ discussed the vital role financial services will play in directing capital flows towards green projects and net zero targets.
But it is not just funding – it is about providing the right funding. In a sustainability context, ‘accessible finance,’ a term that came up multiple times during the conference, centres on matching green investors with ideas that can fuel the green economy to create a more sustainable future.
A follow-on session on green bonds looked at what Malta should be doing as a jurisdiction to enable the growth of sustainable financing through the issue and listing of green bonds. Green bonds have seen exponential growth in recent times, with the first Malta-issued green bond fully subscribed within 24 hours this year. Transparency and investor education have improved tremendously, while investors are now much more clued in and have greater expectations around how the capital is deployed, even before it is raised. The question still remains though what is green?
Which inevitably led to some discussion about greenwashing, and how investors must ensure they aren’t just putting money into token, box-ticking ESG exercises. The speakers noted there is considerable anxiety in the investment management space about getting ESG wrong as they move from being an asset owner to an “asset steward.” Transparency and communication will be crucial in driving confidence in ESG strategies.
Regulatory environment for private innovation
The conference wound up with a look at the steps the Malta Financial Services Authority, Malta Business Registry and others are taking to enact the National Strategy for Financial Services announced by the Malta Financial Services Advisory Council (MFSAC) in March 2023.
The strategy vision is for Malta to be recognised as a competitive, secure and credible financial services jurisdiction that “excels in innovation and responsiveness through a nimble and joined-up regulatory framework and a robust technology foundation.” Financial services as a whole is being given national attention, while supporting the FinTech Village by providing a conducive framework in which FinTech start-ups can launch and thrive will be a key focus.
Concluding addresses by the MFSAC chairman and Malta’s Minister for Finance and Employment referenced the progress the jurisdiction has made: it became a full member of the World Alliance of International Financial Centers (WAIFC) in October 2022, adapted the tax regime to bolster its reputation and has published a legislative master plan to create a policy environment in which private firms can drive innovation. The combination of EU membership and an English common law-based legal code also make Malta appealing to UK, US and European investors.
The emphasis then will be on ensuring the FinTechs and other registered firms in turn satisfy all their tax reporting and regulatory compliance obligations – including meeting international anti-money laundering and know your customer best practice standards – so that Malta can continue to burnish its reputation as a vibrant, highly-regarded financial centre.
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