Employees are an important asset to every organization and it should be the practice of every company to have an employee file for each employee.  The payroll file normally includes contracts of work, documents relating to the employee sent to different government authorities, performance reviews and training given to the employee.  Once the payroll is processed, different documents are required to be filed with the Inland Revenue department.

Employment

Once a company recruits an employee the company is required to prepare an employment contract which makes reference to the laws and regulations applicable for the particular employment, the agreed salary and the type of contract.  A contract can be of for a definite period or of an indefinite duration.  An employee can be employed full time, full time with reduced hours, part time or as a casual employee.

On recruitment the Company is required to submit the Jobsplus engagement form and the FS4 form to the Inland Revenue Department.  The FS4 form includes details of the tax status of the individual, and on it one selects whether it is the employee’s main source of employment, part time employment or other emolument income.

If it is the employee’s main source of employment, the employee can opt to choose single, parent or married tax rates depending on his/her tax status.   Single tax rates can be used by single persons; or by married persons with no children who opted for the separate computation; or by married persons with children who no longer qualify to use the parent tax rates and who opted for the separate tax computation.  Married tax rates can be used by married spouses, normally this is beneficial when only one spouse is in employment or by single parents (unmarried/widows/separated/divorced persons) who maintained a child during the year and meet certain conditions provided that the parent was not in receipt of financial assistance from the other spouse.  Parent tax rates can be used by parents who maintained under their custody a child not over 18 years of age or not over 23 years if receiving full time instruction.  In this section employees have the option to select a reduced rate of tax applicable for overseas employment or for highly qualified persons to pay tax at 15%.  Another reduced rate of 7.5% is available for employees whose main income is from a qualifying sport activity and there is an option applicable for women returning to work.

Employees qualifying for the part-time reduced rate will select Section C of the FS4 indicating whether they qualify for the reduced part-time rate because they are employed elsewhere, or they are in receipt of a pension taxable in Malta or they are receiving full time instruction.

Directors will complete Section D of the FS4, and they are subject to a minimum tax rate of 20%.

Monthly Payroll reports

Once the employee is employed with the Company, the Company is required to provide a payslip to the employee.  For every month, the Company is required to prepare an FS5 form which includes details of the number of employees employed in that month, main emoluments and other emoluments paid to employees, part time emoluments paid and other emoluments paid as fringe benefits.  This report includes the tax amount, the social security contributions and the maternity fund contributions that are required to be paid to the Commissioner for Revenue and this form is required to be submitted by the last working day of the month following that for which it is prepared.

Yearly payroll reports

At the end of the year the Company prepares the FS3s to be distributed to the employees and FS7s.  At the end of 2018, Companies who have more than 9 FS3 forms are required to make an online submission of the FS3 and FS7 documents by the 15^th of February 2019.  Companies with fewer employees can do a manual submission.

Now is the time to decide whether to continue preparing payrolls yourself or whether to subcontract this service, or whether to subcontract this service for employees in a managerial level (for confidentiality purposes).  Otherwise, depending on the payroll software you use, you may need to update the salaries with the cost of living increases announced during the last government budget, the revised social security rates, the revised maternity fund contributions and the sickness and injury deduction rates.  Some payroll software is updated with this common information automatically.

Termination of employment

On termination of employment, the Company is required to complete the Jobsplus termination form and provide the employee with an FS3 until date of termination.

Our services

Our legal team at GM assists clients with the preparation of employment contracts, we assist clients to apply for social security numbers, tax numbers, to process residence applications, and we assist clients to prepare the required payroll documents.

In Malta we have our own default accounting framework that can be used by small or medium companies known as “GAPSME”, which stands for The Accountancy Profession (General Accounting Principles for Small and Medium sized entities). GAPSME regulations were issued in 2015 and are based on IFRS’s but require much less disclosures, and therefore it is less costly to prepare the supporting documents and the financial statements using GAPSME.  As a result, professional fees charged for the preparation of management accounts, and financial statements using this framework are lower.

Overview

GAPSME can be used by companies registered in Malta who qualify as a small and medium-sized company. This framework cannot be used by public interest entities.  To qualify as a small or medium-sized entity a company is required to meet at least two of the following three criteria.

For periods shorter or longer than one year, the balance sheet and revenue totals shall be divided by the number of months and multiplied by 12 months since the limits set are for a full calendar year.

Companies required to consolidate should meet at least two of the following three criteria.

*Computed gross: without any set offs and other adjustments that would be required for the preparation of consolidated financial statements.

**Where revenue is not relevant, a company should include income from other sources

For a company that is exempt from preparing consolidated financial statements, two of the following three criteria should be met on the balance sheet of the parent to use this framework:

Benefits of using GAPSME over IFRS:

This framework is simple when compared to International Financial reporting Standards (IFRS).  IFRS’s are becoming more complex to cater for the needs of all the big companies.   To take an example, under GAPSME revenue regulations are included in four pages which outline how to calculate the fair value of the consideration received or receivable for sale of goods, rendering of services, interest, royalties, rents and dividends, and construction contracts.  The new Revenue standard without accompanied notes under IFRS is over 62 pages long.

IFRS’s tend to change frequently with a number of changes taking place each year.  Some new standards effective for accounting periods starting from 1 January 2018 include IFRS15 Revenue from Contracts with Customers; IFRS9 dealing with Financial instruments; and IFRS 16 Leases effective from 1 January 2019.

Comparative information is not required to be disclosed for items of Property, plant and equipment, intangible assets, investments, non-current investments in subsidiaries, associates and jointly controlled entities.

Various disclosures under IFRS are not required under GAPSME.

Benefits of companies qualifying as small companies adopting GAPSME

Companies qualifying as “Small companies” are not:

• Required to prepare a statement of changes in equity;
• Required to prepare a cashflow statements;
• Fewer disclosures are required to be made by companies qualifying as small companies than by companies qualifying as medium-sized companies.  Amongst others, an entity is exempt from disclosing related party transactions between members of a group provided that subsidiaries which are party to the transactions are wholly owned by a member of the group.

IFRS

If a company does not qualify to prepare its financial statements under GAPSME the company is required to prepare financial statements under IFRS.  If for some reason or other a company wants to prepare the financial statements under IFRS, maybe because it needs to prepare the accounts in the same reporting framework as its parent company, or because it is required by international users of the financial statements (including suppliers) the company can make a resolution to use IFRS.

Directors’ report

Further to GAPSME small companies as defined in the Companies Act of Malta are not required to include the directors’ report in the financial statements.  The Companies Act has the same thresholds as GAPSME for small companies. 

Most companies have a December year end, and therefore it is time to start closing the management accounts to prepare the financial statements.    In Malta some companies have excellent employees preparing the day-to-day transactions and management accounts throughout the year but some assistance is required to prepare the financial statements.  At the same time, auditors are requesting companies to prepare their own financial statements.  At GM Corporate and Fiduciary Services ( a subsidiary of GMI) we provide assistance with the preparation of the financial statements.

Other services offered

Our profession team is trained to provide legal services to incorporate clients in Malta and to provide other legal services, and we have a team of professional accountants who assist companies with matters relating to VAT, preparation of management accounts and financial statements using GAPSME or IFRS. 

Commercial or private aircraft need a passport or identity card to fly. Hilarious? Ridiculous? The answer is neither for a means of identification is what registration of moveable property essentially is all about.  And like any type of seagoing vessel, aircraft is not bound to place of manufacture but to its operational headquarters. This basic premise, however, is much more than stating a legal requirement. For deciding where to register one’s aircraft unravels a list of legal, geopolitical and financial considerations which demand strategic thinking if one wants to make the optimum choice.

What renders Malta an ideal jurisdiction for aircraft registration?

A scrupulous legislation that incorporates the exigencies of the Cape Town Convention (aka the Cape Town Treaty) is the first attractive key factor, that is in turn augmented by the fact that Malta is an EU member state. In fact, Malta was one of the first member states to ratify the treaty on 1 October 2010 [Read ‘Malta’s Aviation Register Ensues Flying High’ for more comprehensive details].  Furthermore, apart from Maltese, the legal system in Malta is also written and conducted in English. The elimination of a language barrier plus factoring in the island’s convenient proximity to Europe, North Africa and the Middle East as well as a stable political climate point to three other significant advantages.

Fiscal benefits are an inevitable, crucial issue. Once again, Malta offers much more that its onshore EU jurisdiction. To begin with, Malta’s Aircraft Register is all-inclusive meaning it integrates both the the aircraft and mortgage registers. As a result, details of ownership, technical data and third-party rights over the aircraft and its engines are available in a one stop shop manner. Ratification of the Cape Town Treaty entitles clients registering their aircraft in Malta to the ‘Cape Town discount’ which translates into a reduction on their borrowing costs. Operational costs are also significantly lower than other EU countries. In addition, Malta is an EASA certified state and has an FAA Category rating, so that safety and security standards are of the highest level.

The main financial incentives to register aircraft in Malta:

• No import duty on the importation of civil aircraft into Malta.
• No stamp duty on aircraft.
• Income generated from the ownership, lease and/or operation of an aircraft or aircraft engine is exempt from Maltese tax since such revenue is deemed to arise outside Malta.
• This foreign source rule applies regardless of the aircraft’s country of registration, or whether the aircraft has called at, or operated from a Maltese airport.
• The VAT rate is based on airtime within EU airspace, the aircraft range in kilometres and the percentage of community use.
• The use of private jets by non-residents is tax exempt since such use does not generate income Significantly, only private aircraft from countries listed below [Sidebar 1] are eligible to be registered in Malta.
• Investment tax credits for any person carrying out repair, overhaul or maintenance of aircraft, aircraft engines and/or aircraft equipment registered in Malta.
• Double taxation treaties enable further tax savings. [See Sidebar 2]
• Elimination of currency conversion charges since companies can pay tax in any currency and receive tax rebates in any currency.
• Competitive accelerated depreciation periods (6 years for aircraft airframe engine & overhaul; 4 years for aircraft interiors and other parts)
• A flat 15% tax rate on minimum income of €75,000 up to maximum of €5,000,000 by virtue of Legal Notice 106 of 2011 applies to the renumeration of employees who are resident but not domiciled in Malta and who fall under the Highly Qualified Persons Rules. Income in excess of €5,000,000 is tax free. These persons comprise: Chief Executive Officers, Chief Financial Officers, Chief Operations Officers and Chief Commercial Officers.
• A flat 15% tax rate on minimum income of €75,000 up to maximum of €5,000,000 by virtue of Legal Notice 306 of 2012 applies to income from specified employments with companies holding an Air Operators’ Certificate issued under the terms of Article 4 of the Civil Aviation Act. This benefit also applies to personnel resident but not domiciled in Malta and includes the roles of Aviation Accountable Manager, Aviation Continuing Airworthiness Inspector, Aviation Flight Operations Inspector, Aviation Training Manager and Ground Operations Manager.

The impetus to promote Malta as a regional aviation hub has also enticed the likes of Lufthansa Technik to open their MRO workshop and training centre here in 2002 subsequently followed by SR Techniks, MCM, Medavia and Bravo Aircraft Technical Services Limited. Their presence offers ample proof of Malta’s appeal for stakeholders in the aviation industry.

While it would be unfair and unrealistic to compare Malta’s Aviation Register with the unequivocal success of its shipping counterpart, registering one’s aircraft in Malta seals an excellent deal. 

GMC has considerable experience in advising clients in the aviation sector.

The firm offers the following services in relation to Aviation:

Registration of Aircraft;

Sale and Purchase Agreement;

Charter and Lease Agreements;

Finance and Securitization;

Maintenance,

Repair and Servicing Agreements;

Claims against carriers;

Operational structures and tax planning;

Negotiations and drafting of aviation related services agreement;

Air Operator Certificates; and

Air Services Licenses.

Legal Support

For further information about how GMC can help you with your aviation law requirements kindly contact us.

Aviation in Malta is an evolving success story. The island is attracting more and more multinationals to establish their flight operations in the heart of the Mediterranean because Malta ticks all the right boxes when it comes to a sound legal framework, highly competitive registration fees, favourable tax treatment, EU membership and above all compliance with the Cape Town Convention.  

Legislation

Enacted in October 2010, the Aircraft Registration Act, 2010 (Cap 503) was tailormade to meet the obligations of the Cape Town Convention that came into force 14 years ago after being signed in 2001 and whose primary aim was to standardize transactions comprising movable property. The treaty subsequently paved the way to the Aircraft Protocol (2004) which applies specifically to aircraft and aircraft engines. As a result, Malta’s aircraft legislation follows the international standards set by the Cape Town Treaty - a most sagacious step since it offers prestige while being flexible enough to respond to the industry’s altering dynamics which to date cover:

• various types of owners
• real rights
• guarantees
• mortgages 
• default remedies

Furthermore, registration is also open to private aircraft, aircraft engines and aircraft still under construction if the airframe is uniquely identifiable, therefore incorporating sub-sectors of both commercial and private planes. The entire legal framework is also available to OECD jurisdictions.

Significantly, trusts are also covered with assiduous care. Registering an aircraft under terms of a beneficial trust is subject to due diligence procedures enabling the Director General responsible for Civil Aviation in Malta to identify the actual beneficiaries without forfeiting confidentiality of the trust arrangement that itself is subject to trust law.

At the same time, the Director General is obliged to safeguard the confidential nature of any trust agreement despite disclosure of beneficiary identity for registration purposes. This essentially means that the Malta aircraft register is based on rigorous legislation and strict confidentiality to deliver a top-of-the league flag.

Given that aircraft offer a prime example of an exorbitant asset, Malta’s aviation laws also deal with fractional ownership which is gaining in standard business practice. The main advantage of collective ownership is the burden sharing of purchasing, leasing and operational costs. Flexibility of schedules comes next, closely followed by familiarity and comfort since unlike making use of chartered planes, fractional owners use the same aircraft. There is also a considerable list of perks. Yet like any ownership agreement, legal procedures must be followed and adhered to. Besides, the intricacies involved in multi-proprietorship clearly render legal protection mandatory.  

Financial Benefits

Competitive registration fees which exclude import and stamp duty on the importation of civil aircraft into Malta combined with tax exemption for any income arising outside Malta and double taxation agreements offer attractive tax planning opportunities for airline and aviation operators who opt to set up operations in Malta. More so since income derived from the possession, leasing or operation of aircraft or aircraft engines is deemed to have arisen overseas and is therefore not liable to tax payment in Malta. This tax exemption is pertinent whether the aircraft calls to, or operates from, Malta irrespective of where it is registered. 

In addition, tax treatment of finance leasing of aircraft distinguishes between under and over 4-year duration. The recent introduction of private aircraft leasing has also inspired a VAT treatment aimed at reducing the percentage of lease charges. The VAT rate is based on airtime within EU airspace, the aircraft range in kilometres and the percentage of community use. Moreover, since the use of private jets does not generate income, such use is not subject to tax liability.  The same can be said for fringe benefits resulting from the use of a private aircraft by non-residents.

Malta’s meticulous legislation and efficient tax system renders it an ideal jurisdiction for stakeholders in the aviation industry.

To find out more contact GMC

The Gaming Act officially came into force on 1st August 2018. The new framework has brought about significant changes that will affect both present and future companies operating within the sector.

Here are some of the most salient points that will impact operators and service providers in Malta.

The MGA has replaced all previous gaming- related legislation with one single act, the Gaming Act. This legislation governs all gaming services in and from Malta and it will be supported by subsidiary legislation, codes, guidelines, and directives.

 The current multi-licence system has been replaced by two licences - a B2C licence (Gaming Service licence) to offer or carry out a gaming service, and a B2B licence (Critical Gaming Supply licence) to provide or carry out a critical gaming supply.

 The duration of each issued licence has been extended from five to ten years, providing operators with significantly more long-term stability.

 When it comes to taxation, all gaming services are required to pay a gaming tax of 5% of their Gross Gaming Revenue generated where gaming services are offered to any player who is physically present in Malta at the time when the gaming service is actually provided. Operators of B2C businesses are also required to adhere to a compliance contribution based on game type and annual revenue, whilst B2B operators will be exempt from gaming tax and only required to pay a fixed fee.

 The new licence fee is EUR25, 000 in addition to the compliance contribution fee which will be added to the total, based on the gaming revenue which has been generated that year. There is, however, a variable component of the licence fee that composes of a minimum fee of EUR15,000 or EUR25,000 and a maximum cap of EUR375,000, EUR500,000, or EUR600,000 which depends on the type of games that are offered to the customer.

 Those providing critical supplies are also required to pay a licence fee which again varies, depending on the services that are provided. Providers of games are subject to an annual fee of between EUR25, 000 and EUR35, 000 dependent on revenue. Those providing back end services or a data control system are subject to annual fees of between EUR3, 000 and EUR5, 000.

Comprehensive clarification has been provided that covers games of chance, chance and skill, and skill. This list of standardised criteria will provide more certainty when deciding which category a game should be placed into. There has also been a shift away from the prescriptive approach, to one that is based more on regulatory objectives.  This should provide for more flexibility for unorthodox games as well as encouraging innovation and new developments within the industry.

 Under the new law, the MGA has extended its supervisory, enforcement, and monitoring laws and a greater emphasis has been placed on transparency when it comes to accessing operator’s data. A new compliance review process has been implemented and it will be used when there is a suspected breach of law or regulations. In addition to this, new reporting procedures have been introduced that will bring the law in line with the latest EU AML laws.

 The MGA will issue a list of non-compliant operators that will be available publicly. To remove oneself from the list, the operator must make a submission to the MGA to address the issues raised. If they are able to provide satisfactory evidence that they are in fact in full compliance, then they will be removed from the list.

 Various regulations have been implemented that will address issues around responsible gaming, underage players, and fair advertising. These have been designed not only to protect players and operators, but to improve the reputation of the industry on a global scale. Additional clauses have been included that are set to ensure the compliance of outsourcing agreements and service providers to guarantee that the integrity of the industry is retained.

 This list is not exhaustive and to gain a fuller understanding of how the new Gaming Act will affect any entity that operates both in and from Malta and within the iGaming sector, it is advisable to engage the services of a legal professional.

Should you have any questions with respect to how these changes shall affect your business, please contact our GM Corporate & Fiduciary team.

On the 1st November 2018, Malta’s Commissioner for Revenue (‘CfR’) issued guidelines in relation to transactions or arrangements involving DLT Assets. What follows covers the tax, VAT and duty treatment with respect to such transactions or arrangements, excluding e-transactions in fiat currency.

THE CFR CATEGORISES DLT ASSETS AS FOLLOWS:

COINS

• Characteristics: Coins are similar to any other means of payment, in that they serve as a medium of exchange and are in no way connected to the issuer.
• Tax treatment is similar to that of fiat currency, i.e. profits or proceeds arising from the exchange or sale of coins (when held as trading stock), is treated for tax purposes in the same way as income. Gains of a capital nature derived from coins fall outside scope of capital gains tax.
• VAT treatment: For VAT purposes, coins are to be treated as other currencies, with relevant exemptions also applicable.
•  Digital Wallets: Fees required by digital wallet providers in relation to allowing users to hold and operate cryptocurrencies are exempt without credit (provided that, cryptocurrency qualifies as currency for VAT purposes). In any other case, service could be considered as taxable.
• Mining: Considering that there would be no direct link between the compensation received and the service rendered, mining falls outside the scope of VAT. However, should a miner provide other services, VAT could be triggered at the standard rate.
• Exchange platforms: VAT implications of exchange or trade on online platforms facilitating peer-to-peer trading or exchange of DLT Assets in return for commission/transaction fees, etc. are to be determined on a case by case basis.
• If the service constitutes an electronic facility provided in order to facilitate such trade/exchange, the service should, in principle, be taxable.
• Any services which go beyond the above provided by the platform in return for compensation and where the DLT assets being traded classify as ‘currency’ or ‘security’, may be exempt.
• An ICO is outside scope of VAT on the basis that at the point of the initial offering the service or good is not identified, nor is the compensation.
• Duty treatment: Coins fall outside the scope of the DDTA.

TOKENS

Financial tokens

• Characteristics of financial tokens are similar to those of equities, debentures, units in collective investment schemes, or derivatives including financial instruments, in that they may grant rights to dividends, rewards based on performance, voting rights, ownership or rights secured by an asset as in asset-backed tokens.
• Tax treatment: Returns derived from the holding of tokens, such as dividends, are treated as income. Determining the tax treatment applicable on transfers of financial tokens requires the distinction of capital vs trading that is depending on the intention, referring to the badges of trade if needed. If the transaction is of a capital nature, article 5 would be applicable only if such token meets the definition of ‘security’.
• Proceeds from initial offerings are not treated as income and the issue of new tokens is not treated as a transfer for the purpose of capital gains tax.
• VAT treatment: Raising finance by issuing a financial token does not constitute as a supply of goods or service in return for consideration and therefore, does not fall within the scope of VAT. On the other hand, services supplied on exchange platforms have the same implications of ‘Exchange platforms’ described above.
• Unless the underlying good or service in exchange for the initial offering is identifiable, an ICO is outside scope of VAT.
• Duty treatment: Where DLT assets have the same characteristics of ‘marketable securities’, transfers shall be subject to duty as prescribed in the applicable provisions of the DDTA.

Utility Tokens

• Characteristics: Value and application of utility tokens is restricted to the acquisition of goods or services within the DLT platform, within a limited network of DLT platforms or in relation to which they are issued, but they have no connection with the equity of the issuer.
• Tax treatment: Determining the tax treatment applicable on transfers of utility tokens requires the distinction of capital vs trading, i.e. depending on the intention, referring to the badges of trade if needed.
• An initial offering in the case of utility tokens binds the issuer to provide services/goods to the holder, and in this case, gains or profits realised from the provision of the service or the supply of the good are to be considered as income.
• VAT treatment: where a token is exchanged for a good or service (which is known), such token is to be treated as a voucher.
• Single Purpose Voucher (SPV): if at the time of the issue of a voucher representing an underlying good or service, the place of supply as well as the VAT due are known, consideration in respect of such voucher would create a tax point and therefore trigger VAT in terms of the Fourth Schedule of the VAT Act.
• Multi-Purpose Voucher (MPV): MPV is one where the place of supply and the VAT due are unknown at the time of issuance. In this case, VAT is due at the time of redemption.
• Unless the underlying good or service in exchange for the initial offering is identifiable, an ICO is outside scope of VAT.
• Duty treatment: On the basis that utility tokens have no connection with the equity of the issuer and that these are not considered as similar to securities, utility tokens fall outside the scope of DDTA.
• Tokens may contain characteristics of both financial and utility tokens which are referred to ‘hybrids’ and these are to be treated depending on the context in which they are used.
   

OTHER CONSIDERATIONS

• Value of DLT assets is determined by referring to the market value of the DLT asset in question.
• Obligation to keep proper records of transactions still applies which must be translated to the reporting currency in which the taxpayers present its financial statements.
• Treatment of payment applies in the same manner as payment in any other currency.
• For VAT purposes, the place of supply of Electronically Supplied Services to a non-taxable person, where the reverse charge mechanism does not apply, is where the customer is established.

Please be aware that the treatment of transactions in respect of VAT, tax and duty, concerning any type of DLT asset will not necessarily be determined by its categorisation, but will ultimately depend on the purpose for and context in which the transaction is made according to the applicable Act.

Should you wish further clarification get in touch with  GM Corporate & Fiduciary Services Ltd

If you keep tabs on the fintech, then you are already well familiar with the hype machine known as blockchain. But, there are still plenty of people who have either never heard of the blockchain or misunderstand the technology and it’s potential.

What’s the big deal, then?

Even if you’re not interested or involved with fintech, the blockchain has the potential to impact your life both personally and professionally. This isn’t just hyperbole. The blockchain is going to be the next thing.

And, that’s why it’s vital that you get caught up to speed on its past, present and future.

What is blockchain and where did it come from?

Blockchain is a simple digital platform for recording and verifying transactions so that other people can’t erase them later -- and anyone can see them.

For the techies out there, the blockchain is an anonymous peer-to-peer payment system that relies on secure cryptographic protocols. It uses a public ledger and database to record all record transactions. However, it’s decentralized. This means that there is no governing body controlling the blockchain.

If that sounds like bitcoin to you, then you’d be correct. The blockchain was built using the bitcoin system that was released by Satoshi Nakamoto in 2009. Although, the idea of cryptocurrency can be traced back to the work of David Chaum and his invention known as DigiCash back in the 1980s.

What Is All The Fuss About Blockchain?

The blockchain ledger helps to provide transparency for transactions. Although many bitcoin transactions are in some ways anonymous, the blockchain ledger can link individuals and companies to bitcoin purchases and ownership by allowing individual parties, called miners, to process payments and verify transactions. Rather than a central company presiding over the use of bitcoin, these blockchain originators serve central roles in the management and administration of this alternative currency system.

In other words, the blockchain is actually composed of single transactions known as “blocks.” Each block links together and forms a complete bank history of transactions. Once a block is linked, it cannot be edited.

Unlike bitcoin, the blockchain is constantly evolving and can extend beyond cryptocurrency. Before we get much further, here are a couple key pointers to remember :

• It can transfer value or information in a secure manner.
• It can facilitate, as well as track, “Smart Contracts.”
• Removes intermediaries and allows the end user to interact directly with the ledger.
• Reduces the cost of transferring value and money anywhere in the world for next to nothing.
• Provides almost instant, secure, and borderless transactions.
• Can automate payment protocols that are permanent, irreversible and tamper-proof.

Why are people excited about blockchain?

This is a really good question. And, there isn’t just one answer. Almost everyone can agree that the blockchain is one of the most interesting and disruptive forces to come along in quite some time. And, that’s because the blockchain is able to:

1. Prevents payment scams.

One of the most talked about advantages involving blockchain technology is how it can prevent future payment scams. For starters, it would protect both buyers and sellers by using “smart contracts.” This procedure would avoid those instances where you purchase an item and the seller doesn’t follow through.

Another way that scams are thwarted is that since all transactions are recorded, a coin can’t be used for double-spending or counterfeited. Once a coin, token or electronic currency is spent, it can’t be used again.

There’s also the possibility that companies and individuals can no longer “cook the books” or price gouge customers. Again, since every transaction is recorded, every cent is accounted for and would prevent an Enron type situation. Price gouging could be a thing of the past since it would protect intellectual property by being shared publicly on the blockchain.

The most discussed perk is how secure the blockchain is. Besides transactions being placed in the ledger, it is secure because transactions are directly between two parties that require a unique signature to authorize the transaction. Without third parties and the signature, coins and token can’t be altered.

2. Cuts out the middleman.

The blockchain is a peer-to-peer system, meaning that transactions are between you and another party. This simple two party only, could be a real game changer. We use this to be able to facilitate cheap ecash transactions across the world. For example, you could send friends or family money anywhere in the world without having to pay for the transaction or currency fees that traditional banking or financial institutions have used.

3. Settles transactions in minutes.

Imagine being able to send and receivemoney from across the globe in just a matter of minutes. How about receiving a signed contract or vehicle title in just a day? No matter the scenario, blockchain decentralized and the P2P system allows you to settle any digital wallet transaction quickly, as opposed to waiting days or weeks.

4. Increases storage.

Cloud storage is an incredible development. But, you don’t have any control of the storage infrastructure. It’s in the hands of Google, Dropbox, Facebook or Apple. And, that could become a concern if you value your privacy. Since you’ll need an encryption key to access your data, you can rest assure that no one else can access it except you.

6. Rewards users.

Who doesn’t love reward programs? The blockchain can improve loyalty programs by giving customers the ability to trade points among each other since the transactions would be placed in the public ledger. It would also open up the possibility of using points at different vendors. For example, you could use some of your airline points at your favorite coffee shop or eCommerce site.

Because of those capabilities, the blockchain will be able to disrupt the following;

• Finance -- Blockchain will remove the need for traditional banking and financial institutions by replacing back-office systems with a P2P system.
• Contracts -- ‘smart contracts’ will be used, which is “a financial security held in escrow by a network that is routed to recipients based on future events, and a computer code.” Besides, contracts, deeds, titles, and other important documentation will be shared on the public ledger.
• Patents and Copyright -- Whether it’s a new innovation, gaming app or piece of music, the blockchain can prove that you had ownership of the intellectual property first.
• Voting -- When people cast their ballots, it will be recorded during elections.
• Collectibles -- The blockchain could be used to track and validate scarce or limited items like coupons or a piece of artwork.
• Bills of Lading -- Cryptographic signatures can be used to eliminate distrust on everything from shipped products to changing shifts at work.

Because of this, blockchain technology actually has the potential to change the world. And, that’s why there’s so much buzz surrounding it.

Where is the blockchain headed?

Blockchain is just the beginning. In fact, expect the technology to continue to improve and evolve in the immediate future.

If you are interested in setting up  a DLT company, an ICO, a cryptocurrency exchange, we welcome you to get in touch with our lawyers.

*The above article has been posted on Mondaq on 19th November 2018.

1. Administrative services

The role and duties of public administration have not changed for centuries. What has changed dramatically is the amount of data and the way public institutions process it. And while there are digital technologies in place that help collect and process the data, some issues are left unsolved -anonymization, transportability and immutability of this large array of data.

What public administration lacks at the moment is a more convenient user experience (UX) to work with the data. What could improve the UX is the introduction of a certain layer, a trusted common environment that will anonymize and store the data transparently and unalterably.

Governments are slowly recognizing these issues. Distributed systems could indeed help create such a trusted environment, improve our work with Big Data and even serve as a glue bringing all emerging technologies together including artificial intelligence (AI) and Internet of Things (IOT) . It is essential to demonstrate not theoretically but practically now that blockchain-backed systems can work, that all that experts claim is possible. In other words, more production-ready solutions are needed.

2. Payment services

Governments need to make transactions, and many of these involve an exchange of funds. Blockchain technology has potential applications in reducing the cost overhead in funds transfers. This can be done either with the help of launching new cryptocurrencies that are based on blockchain or by using blockchain as a means of transfer of funds itself. If this is perfected, the possibilities for businesses are endless, particularly for those that transact internationally or over the internet.

We may not be there yet, but the exciting possibilities are virtually calling out to the private sector and businesses.

3. Digital and intellectual property rights.

Governments have the responsibility to maintain copyright records and databases. These records prove the ownership of intellectual property. A blockchain-based system can allow for time stamping of work by various performers, artists and writers, etc. This type of system can, in theory, sniff out copyright violations and also enable the permanent record keeping of rights. Governments are making a move toward this already.

This is still in the early stages of implementation, but it opens up possibilities for businesses to duplicate the technology for record-keeping as well. Theoretically, businesses can use blockchain for accounting purposes and to sniff out errors in real time.

4. Tenders

In order to build public infrastructure or to deliver services, governments want to benefit from economies of scale as well as competitive bidding. However, the bidding process is not always fair or transparent. Public procurement has long been a victim of rampant corruption in different parts of the world. Contracts to suppliers can be awarded without fair competition. This allows companies with political connections to triumph over their rivals. Or companies within the same industry can rig their bids, so each gets a piece of the pie. This increases the cost of services to the public. We’ve found that corruption can add as much as 50 percent to a project’s costs.

So how can blockchain fix tendering? Unlike scattered centralized systems, a single ledger powered by blockchain can refine the tendering or any other process where financial tracking needs to be as transparent as possible. The adoption of blockchain will help to track how funds are being spent and ensure the expenses are made as was intended and within the permitted time.

A majority of these cases are far from complete, but they do present a lot of possibilities for businesses and governments. Of course, the key is in implementation, but we can certainly bear to have some optimism that this often misunderstood technology just may be finding places of permanent usefulness.

Company Description:

GM Corporate & Fiduciary Services Ltd. (www.gmcorporateservices.com) is a fast-growing multi-disciplinary corporate service provider that is active in various areas of the financial services industry. Its services range from the incorporation and administration of corporate entities to the licensing and administration of Investment Funds.

Job Description:

We are currently looking for a Junior Accounts Executive to join our dynamic accounting team. The chosen candidate will support the finance department with managing daily accounting tasks and report directly to the Senior Accountant.

Responsibilities:

Bookkeeping & bank reconciliations;

Creditor control;

Preparation of invoices and credit notes;

Maintenance of accounts ledgers;

Assistance in the preparation of VAT returns;

Other accounting-related duties.

Requirements

• Excellent organizational skills
• Ability to work comfortably with numbers
• Attention to detail
• Good understanding of accounting and financial reporting principles and practices
• Knowledge of MS Office
• Good verbal and written skills in English and Maltese
• Confident communicator
• MCAST AAT Diploma in Accounting or equivalent
• A level accounts and / or one year related experience would be an asset.

To apply:

Interested candidates are to apply by sending their CV together with a cover letter to HR Manager: hr@gmint.com, quoting in the subject field “Junior Accounts Executive” by 30^th November, 2018.

Organisations, both private and public, hoard personal data. The General Data Protection Regulation (GDPR) is a unified privacy regulation that introduced more privacy rights to data subjects by introducing new procedural and organisational obligations for data processors. GDPR curtails the unnecessary hoarding of data by data processors and also introduced a right for individuals to have their personal data erased.

However, technology has a habit of running ahead of legislators. For instance, take blockchain: it relies on a distributed ledger system that is decentralised and immutable, and is intended to be a permanent and a tamper-proof record that sits outside the control of any one governing authority.

Anne Toth, head of Data Policy at the World Economic Forum, contends that because data stored on the blockchain, including personal data, cannot be deleted, there is no way to exercise “the right of erasure” that people are granted under GDPR. Some have propounded that the ‘right of erasure’ can be reconciled with blockchain technology by persuading regulators that ‘erasure’ does not have to imply that data is literally deleted and that making data permanently inaccessible without deletion should produce the same result.

The challenge is that GDPR does not define what it means to ‘erase’ data.

Where personal data is saved on a blockchain in hashed form (meaning that the data is transformed in a way that it cannot be reverse engineered to its original state), one can argue that the existence of the hashes on the blockchain are not in violation of GDPR as data is sufficiently anonymised, such that it falls outside the definition of personal data under the GDPR regulation in the first place.

Yet, the Article 29 Working Party (now replaced by the European Data Protection Board) in its Opinion 05/2014 on Anonymisation Techniques had partially concluded that hashing may still leave some small possibility of a successful brute force attack. A brute force attack is an instance where an attacker tries an extremely large number of guesses with the hope of eventually guessing correctly, thereby exposing hashed personal data stored on the blockchain.

Still, others contend that an alternative solution might be that of encrypting all personal data with a key and in the event that a data subject would request his blockchain data to be erased, the key would be deleted, which in layman’s terms should be tantamount to deletion for GDPR purposes. The challenge is, however, that GDPR does not define what it means to ‘erase’ data. Another possible reconciliatory solution in respect of the ‘right of erasure’ might be that of keeping personal data in separate ‘off-chain’ databases, but to do so would sacrifice several of the benefits of using blockchain in the first instance.

In the light of the above, companies should be aware of the risk of developing blockchain technologies that will include personal data of EU-based individuals until there is clarification on the interpretation of the obligation to ‘erase’ data, or until GDPR is amended to take blockchain into account.

Malta has fast become a global leader in the regulation of blockchain-based businesses and the jurisdiction of quality and choice for world class fintech companies. Bringing professionals who understand and embrace decentralised technology together with the island’s best legal minds.

As expected and by virtue of Legal Notice 306 of 2018 and Legal Notice 307 of 2018, the Innovative Technology Arrangements and Services Act and the Virtual Financial Assets Act will both come into force on 1st November 2018, paving the way towards Malta's emergence as the "Blockchain Island". In addition to the Acts, various Consultation Documents have also been published in draft form by the Malta Financial Services Authority ("MFSA") and the Malta Digital Innovation Authority. These set out additional statutory requirements and guidance to persons wishing to operate in this industry, and are expected to likewise be finalised within the coming weeks.

The Virtual Financial Assets Act caters for a very attractive transitional regime, for persons operating prior to the coming into force of the VFAA. VFA Services providers, as defined, may benefit from a 1 year transitory period, commencing on 1st November 2018 – during which period they may operate without a licence, subject to an application for a licence being submitted by the VFA Service Provider to the MFSA within said year. In order to benefit from the transitory period, VFA Service Providers must be operative in Malta prior to 1stNovember 2018 – the date of coming into force of the VFAA – and must immediately on the coming into force of the VFAA, submit to the MFSA a notice informing the MFSA of the services currently being provided.

In the case of ICOs, issuers may also benefit from a transitory period. The transitional period for ICOs is that of 3 months, provided the offer is made to the public in the 2 weeks prior to the date the law comes into force i.e. between 17th and 31st October 2018 – again in this case, a notification must also be submitted to the MFSA on the coming into force of the VFAA, wherein the issuer informs the MFSA of its activities.

Relevant government budget 2019 measures: 

Cost of Living Allowance (COLA) – increase of €2.33 per week commencing January 2019 – view 2019 COLA

Bonus and weekly allowance to remain fixed as in 2018 – view bonuses for March, June, September and December

No changes in the Malta resident status tax rates for 2019 – view 2019 resident status tax rates

No changes in indirect taxes

Employee vacation leave in 2019 is to increase by from 200 hours to 208 hours per annum, in compensation of public holidays falling on an employee’s day of rest

Tax deductions shall be increased in 2019 by €300 for school fees paid to private independent schools and/or kindergarten centres (kindergarten – max €1,600; primary – €1,900; secondary – €2,600)

The schemes known as first-time buyers, second-time buyers, vacant property in urban conservation areas, property purchased in Gozo and refund of expenses on restored buildings are to be retained in 2019

Rent subsidy will be reformed and increased from €1,600 to €3,600 p.a. for single persons and from €2,000 to €5,000 p.a. for families with 2 or more children.  While means testing on assets will be substituted by new benchmarks

Tax avoidance and evasion mechanisms shall be strengthened

The refund scheme on the VAT paid on the purchase price of a bicycle and electric bicycle shall remain in force

The refund scheme on the purchase of motorcycles, scooters and electric bicycles shall remain in force up to a limit of €400

Grants for bicycle racks shall be extended to Local Councils and private enterprises

No registration tax shall be charged on the purchase of electric and hybrid vehicles in 2019

The grant scheme for vehicles that work with gas instead of petrol shall remain the same in 2019

Pensions will increase by €2.17 per week which when added to the COLA of €2.33 will result in an effective increase of €4.50 per week

Tax ceiling for pensioners will increase to €13,400

Pensioners aged 75 years and over shall retain the annual €300 grant on the condition that they live in their own home

Tax credit for third pillar pensions to increase to a maximum of €2,000 p.a. while the tax credit shall be calculated on 25% of the third pillar pension paid

Seed investment scheme and other incentives to be introduced for start-ups

Children allowance to increase for families earning less than €20,000 gross per annum (certain conditions apply)

Employees utilising the single tax rates and their income is of a part-time nature shall not be taxed if their income is higher than €9,100 but lower the minimum wage

Self-employed persons shall be able to apply for unemployment benefits not available in previous years

Married persons both of which suffer from chronic conditions shall benefit from an increase of €5.14 per week in the medical allowance

Non-taxable pensions shall increase in 2019 from €13,200 to €13,434

Service pensions shall increase in 2019 by €200 p.a.

New incentives shall be introduced to public sector employees such that they may chose to retire after the age of 65

Disability allowance shall increase from €140 to 150 per week in 2019

Children disability allowance shall be increased to €25 per week

Reverse osmosis equipment (or the like) purchased shall be eligible for a VAT refund up to a maximum of €70

VAT refund on wedding expenses shall be increased to €2,000

Electronic books, newspapers and other publications shall attract VAT at 5%

A refund on musical instruments purchased overseas shall be introduced

Transfers of company shares from parents to children shall have the duty on documents decreased from 5% to 1.5% up to December 2019

Ex-gratia payment on the VAT paid on new motor vehicles purchased in 2008 shall be returned

Affordable rental allowance means test to be removed.  Eligibility shall on the gross family income including investment income and the established benchmark

New schemes shall be introduced on properties rented long-term at moderate prices

New schemes shall be introduced were government would pay the bank interest on property loans taken out by persons over 40 years of age for the purchase of their home (certain conditions would apply)

Eligibility of free tal-Linja Card: Persons of ages 16 to 20 and full-time students over the age of 14

The Malta Digital Innovation Authority shall be set-up to protect the interests of the consumer and the investor to complement the Blockchain legislation

In 2019 Gozitans working in Malta will be entitled to the Gozitan Works Subsidy

Private enterprises creating new employment in Gozo shall be entitled to a refund of 30% of the employees wage up to a maximum of €6,000 (certain conditions apply)

MATSEC and SEC examination fees shall be removed

VOs (voluntary organisations) whose income is not greater than €10,000 shall be exempt from tax

No increase in excise duty on cigarettes, tobacco and alcohol

*To access the full document of the Budget 2019 please click here.

The shipping industry has been given a fresh opportunity to strengthen the security of their data that could spell the end of paper documentation.  Blockchain technology promises to revolutionize container logistics by connecting the supply chain in a way the industry has never seen before. Should the technology enter operation it could also bring annual cost savings, eliminate time-consuming processes, as well as create trust and partnership to all parties involved. Blockchain establishes a shared, immutable record of data which is encrypted and inherently resistant to modification, requiring confirmation from all participants in the network before any changes can be made.

What is blockchain?

A blockchain is a database that is used to store digital assets or transactions which is then replicated and shared across a network. There is now wider interest from the maritime industry in the potential uses of this technology to streamline maritime transactional processes.

Its ability is to create “mutual distributed ledgers,” which are self-governing, tamper-free, online databases that no one owns but that everyone has access to and can trust. It promises the potential of mass disintermediation of trade and transaction processing.

Container logistics is rooted in a byzantine world of legacy IT systems, massive amounts of data-entry-type paperwork and milestone management processes. Each process requires a different set of documents, typically done by humans interacting with multiple parties, whether that’s with legacy computer systems, email, phone calls or sometimes even faxes.

Each of these interactions represents a potential point of failure, vulnerable to illicit manipulation or simply human error.

The money spent on processing documents that are not digitized is astronomical.

The introduction of blockchain in the marine shipping environment eliminates much of the problem in today’s cargo logistics process. Each blockchain consists of records, called “blocks,” which reference and identify the previous block using a cryptographic function. This forms an unbroken, verifiable chain of custody. Old transactions are preserved forever and new transactions are irreversibly added to the ledger. The beauty of this process is that it’s distributed, meaning it can live on multiple computers at the same time, accessible to anyone with an interest in that particular transaction. So it literally could enable smaller companies to be more agile within the global trade environment.

Blockchain Benefits

A blockchain has three main characteristics that lend itself to improving transactions. It is distributed, immutable and permissioned. As the information within a blockchain is duplicated throughout a network it is not stored in a centralized location, which allows anyone to access an up-to-date version of the information (distributed). The information is protected as old blocks cannot be tampered or altered, and new blocks of information must be verified by consensus of other members in the network before it is appended to the previous block (immutable). Which, in the maritime example as it uses a private blockchain, can only be done by those within a set network that have the correct read/write approval (permissions). This creates a tamper-proof and time-stamped digital paper record of the origin and journey of all the transactional documents.

For the maritime industry, the cost and efficiency benefits of blockchain technology are noticeable in the context of cargo management, as the safety of cargo transportation requires considerable logistical and administrative investments. In the case of paperwork, these include Bills of Lading, Letters of Indemnity and Charters. To complicate matters, cargo, like oil, can be sold multiple times in rapid concession during short voyages. The final paperwork must be signed and approved by a multitude of entities within the transaction before the cargo can be discharged. This, in turn, would mean it must be couriered between these entities, which is both time-consuming and expensive. With the adoption of blockchain technology, it could create a more efficient and secure platform for transactional demands.

Blockchains would also help replace the typical transactional paper documents with digital forms. By allowing IoT (Internet of Things) port infrastructures to automatically update cargo information it would also allow for the tracking of containers from boat to stack, or verifying the weight of goods during discharge.

Blockchain in the Real World

The main attraction of blockchain as an efficient platform is to reduce the instances of an criminal or terrorist activity.  Two examples of document fraud for criminal gain that blockchain could inhibit are Forged Bills of Lading and the “Trojan” Container.

In the first instance, an attacker creates a fake set of Bills of Lading (acknowledgement of receipt of cargo) to allow the discharge of cargo in advance of the intended receiver. To create these ‘documents’, it requires specific “insider” knowledge of the cargo. Blockchain technology can limit viewing rights to specific documents within the transaction to the multiple entities that require it. It also would create a log every time a document is viewed and by whom. This digital verification of paperwork would mitigate against the acceptance of forged Bill of Lading by local shipping agents.

In the second scenario, the spectre of the “Trojan” container is becoming more common as vessels are able to carry a far greater number per voyage than ever before.  With the turnaround times in ports kept to a minimum in order to reduce downtime of vessels, it is impossible to rigorously check the manifests and contents of all containers. Therefore, containers carrying cargo different from that of the official documentation is a genuine possibility.  Incorporating a blockchain system into the customs processes would reduce the required time for the verification of documents to occur.

In both of these examples, there is potential for terrorist groups to utilise these attacks. By being able to hide cargo in containers and circumvent the port security, it can allow the movement and trade of weaponry or explosive materials used to fund terrorist activity.

Risks and Challenges of Blockchain

Blockchain technology facilitates customs clearance processes through integration of electronic processes.

There are potentialities for an attacker or hacker to manipulate the transactional system. This highlights the human oversight that should remain in order to verify the accuracy of inputs.

There is also an interest in the possibility of implementing smart contracts, which would allow the automation of parts of the transactional cycle, including the ability to issue a refund if cargo verification fails. Currently, within transactional documents, there are a wide range of clauses, including force majeure (unforeseen circumstances affecting charter) or demurrage (failure to meet contractual agreements). This makes it difficult to build these into an automated system as insurers rely on their claim adjusters to make a fair assessment of the facts pertaining to the loss. An automated database would not be able to account for the ramifications of breaches due to the type of transaction, the vessel classification and the route for example.

Also, there needs to be a system of governance and consciousness that we apply when determining whether the technology should be deployed.

Relationships that are valued in the market today will look completely different in the future. Today it’s human-to-human selling or interaction, whereas tomorrow most of this information or the ability to create those relationships will be managed more by technology and by processes rather than human beings selling to each other. Blockchain would dehumanize the process of buying, selling and perhaps operating.

At the same time, there’s a duty of care to ensure this technology is implemented in the right settings. For example, we don’t need to go and create social-economic issues in developing countries where jobs might be replaced by automation. But at the same time, in European and Western countries where we have a higher head-count cost, the technology can enable us to reduce those costs.

 The Future of Maritime Blockchain

If successful it could lead to the reduction of paperwork required per transaction, in turn, reducing overall costs and improving efficiency. A trading platform based on blockchain technology could create an auditable and tamperproof paper trail which in turn will improve overall confidence in the transactional security and reduce the scope for criminal and terroristic activity.

Blockchain will also allow humans to collaborate with each other and create the trust that has never been created before. It has a very wide-reaching potential that, if applied in its most holistic sense, would be extremely beneficial.

Wide-scale adoption of the technology could be hampered, however, if large industries and the people involved in supply chain management don’t move beyond the current “proof-of-concept” trials out of apprehension over sharing data. Or worse, from fear about how it will change their business models. And that’s the biggest risk of all: that the technology won’t be used.

The beauty of the technology is that no one needs permission to implement the use of blockchain; there are no regulations—the field is wide open—we can simply go ahead and do it. But there’s an inherent lack of understanding of the technology that is inhibiting a more widespread use.

*This article has been published in Maritime Economies on 26th September 2018. 

The whirling hype of blockchain and the race to benefit from its instant click efficiency and spiralling profitability continues to generate truckloads of excitement. It is rocking captains of industry and the maritime sector is on the frontline of all the buzz.

But what really lies behind the seductive spin?

As a decentralised ledger database recording the history of transactions via encryption, blockchain does away with a deluge of paperwork and the reliance on go-betweens. This are its two most appealing attributes providing music to the ears of shippers who for centuries on end have had to contend with the myriad intricacies and inherent fragmented nature of transporting goods across rivers, seas and oceans. Blockchain speeds up and secures documentation (particularly the costly yet invaluable Bill of Lading) contracts and payments (especially in relation to VGM messages) and the ability for all stakeholders to communicate with each other in real time and track a consignment at whatever point it happens to be.  It is a tracking system made in cyber heaven which renders a time-consuming supply chain a thing of the past.

Even the bureaucratic nightmare of a damaged/lost/stolen Bill of Lading and consequent delays and astronomical expenses become history. Security is said to be ensured by hashing each new block of records with past blocks, any attempt to alter or tamper with a historical record is easily detected because every node has a copy of the ledger and can compare encrypted hashes for authenticity.

In today’s digital world, the time is clearly ripe for a paperless, inter-connecting recording system. This demands a total switch to a digitalised mentality. The generation gap among stakeholders is inevitable; more so given the dizzying swiftness of today’s technological leaps. And some will sink rather than swim. Nevertheless, this is no insurmountable stumbling block. Think of today’s mobile phones. It is not just the young and trendy who hog their smart phones and cannot live without them. Or use them as a social statement.

Blockchain also offers a level playing field to all shippers because the small players, who can never compete with the reputation, clout and assurance of the bigger shots, will no longer need intermediaries and brokers to build trust. This is any shipper’s dream, which gets even sweeter when computer giants like IBM promise unprecedented levels of collaboration, trust, transparency and accountability thanks to Blockchain’s use of public-key cryptography. Significantly, IBM are not merely touting a slick marketing campaign. They are collaborating with Maersk, the Danish shipping conglomerate, to tailor make the tracking of individual shipment of containers rather than an entire shipment.  

Blockchain applications are indeed mushrooming and morphing at breakneck speed to respond to individual, fully customised requirements – yet another crucial, logical development to cater for the different needs of chartering, bunkering, transporting passengers and goods, dry- and wet-bulk, small and large consignments, short and long distances, different border compliance policies, insurance regulations. The list goes on and on. Sceptics should look up visionaries like Alexander Varvarenko, owner and CEO of VARAMAR Group who has succeeded in automating and digitalizing dry-bulk, wet-bulk and heavy cargo and is now intent on integrating Blockchain and introducing crypto-currency exchange in sea-freight. An ambition that is the natural next step after his shipping company was the first to introduce and use Bitcoin in exchange for transportation.                

That Blockchain empowers the shipping industry makes more than a compelling argument.

Yet as it hurtles it into the omnidigital age, critical thinking needs to be applied. After all this is a nascent technology where its creators as well as users are still taking toddler steps, learning as they tread thrilling ground with an eye on unimaginable prospects on the horizon.

For shippers to truly taste Blockchain success, all users must go digital at the grass-roots to collect and store information. Barriers of lack of knowledge and the challenge to keep up with a rapidly evolving digital system cannot be glossed over. Nor can the considerable capital outlay it involves. Does this not automatically create and consolidate an even more oligarchic maritime industry in the hands of the richest, tech-savvy players? It would have to be much more affordable and accessible to really get all shippers on board.

Unlike aviation, sea rules and regulations are far from streamlined. How does Blockchain apply IMO (and the even more stringent EU) maritime policies? Does it prevent any user from ignoring these rules and regulations? 

Tailormade applications for individual users together with a quick response to collective economic problems are the main spur for Blockchain success and development. The multiple platforms in the maritime industry call for short, segmented different parts of the chain which must have a beginning and an end. This will not only keep them manageable but more importantly reduce the risk of cybercrime. At the same time, such short chains must be part of a bigger network to achieve a truly interoperable system, which will even enable entire industries to work together. In other words, collaboration is key. So are mutually agreed upon structures.

Trust remains a big issue. If a lack of trust plagues maritime operations today, how does Blockchain build trust in an environment that steers clear from personal rapport? This may not be such a hurdle since many people today are already living in their own bubbles. But how does it safeguard against error, misuse and fraud? Does not the basic GIGO (Garbage In/Garbage Out) concept still hold?  Data entry, distribution and storage must be 100% secure for all users, entailing much more than password protection. Access must be well controlled and defined to stave off cyber criminals who are becoming clever and clever. And how will stakeholders ensure that all users will have the time, diligence and willingness to comparehashes for authenticity.

The basics of ‘Who is who?’ and ‘What is what?’ and ‘How is how?’ point to how fundamental it is for Blockchain to be part of a bigger security and operations framework. Again, who will be in control of all the buttons?

Barebone answers will eventually deliver the security, accountability and transparency of Blockchain.

*This article has been published on Mondaq on 26th September 2018.

In GM Corporate & Fiduciary Services Ltd. we are currently looking for a Junior Accounting Technician to join our dynamic accounting team. If you interested in applying for this position, please download the full vacancy document.

In a State visit to Bulgaria, the President of Malta Marie Louise Coleiro Preca underlined the importance of Malta and Bulgaria as strategic bridges in the Mediterranean Sea and the Western Balkans respectively for both culture and economy. 

While delivering the closing address of the Bulgarian-Maltese Business Forum organised in Sofia, Bulgaria for Maltese and Bulgarian business leaders to mingle, the President emphasised the political will of the Maltese Government to explore opportunities in trade, economical collaboration, and tourism growth, amongst others, and urged both countries to seek such opportunities in the best interests of their people.  The President encouraged the stake holders to keep up the “excellent momentum” achieved during the State visit which included meetings with relevant collaborators from various sectors.