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Malta Can Become “The Epicentre of Security Token Financing”

Traditionally having served only the domestic market, the Maltese Stock Exchange has been actively undertaking a process of internationalisation, leveraging on the country’s status as a leader in digital asset regulation to offer the world innovative capital market solutions.

Joseph Portelli is the Executive Chairman of the Maltese Stock Exchange. Portelli founded the Institute of Investment Analysis, and has over 36 years of experience employed in various capacities within the financial industry in the US and in Malta. During his career, he has served as a portfolio manager, currency and commodity trader and has been employed with Bank of America Corporation, Nomura Securities International, Inc., Goldman Sachs, Millburn Ridgefield, Global Capital, and Liongate Capital Management. He is also the founder and Chairman of Financial Services Gozo, a public/private organisation aimed at promoting Gozo as a destination for financial services companies. An alumni of the City University of New York, Portelli is also a visiting lecturer at the University of Malta, and has taught courses at the Central Bank of Malta, Malta Institute of Accounting, and other institutions. He is a regular contributor to the Times of Malta, writing about investor education.

In our globalised world, small countries often share distinct advantages and disadvantages when compared to bigger economic rivals.

In particular, their challenges relate to lower economies of scale, and traditionally less diversification and macroeconomic policy autonomy. Yet on the other hand, smaller nations generally benefit from certain political advantages that are geared towards greater cohesion and flexibility – recognised as important determinants of the investment climate and economic growth.

Malta, a tiny island-nation in the Mediterranean, and the smallest European Union member state, has played to these strengths marvellously in recent years, positioning itself as the bloc’s fastest growing country. Indeed, it has done so using its small size to its considerable benefit.

Owing to Malta’s geographical limitations, its economy has needed to be flexible to compete. But it’s also down to its small size, and the government’s philosophy to openly embrace digital disruption, that it has been quicker to adapt than most – leading to the recent creation of genuine world-leading industries in the emerging spheres of iGaming and Distributed Ledger Technologies (DLT).

It’s this openness to modernise and internationalise the economy that not only helped Malta address one of its inherent economic challenges – diversification – but also led to an explosion in foreign investment, and the island-nation’s impressive GDP growth.

“Modernise, institutionalise and internationalise”

Traditionally having served only the domestic economy, the Maltese Stock Exchange (MSE) – which was established in 1992 – is now actively in a process of adapting to the country’s internationalisation, and facilitating further foreign investment through expansion.

“We decided at a board level that it was time for the Malta Stock Exchange to be a little bit more ambitious: to modernise, institutionalise and internationalise”, explains Joseph Portelli, Chairman of MSE.   “We’re now trying to expand our capital markets base. Not because it’s sexy, because we believe we need to. So, for us it’s important that we look overseas and we look beyond our shores.”

In order to do this, MSE – along with a delegation of Maltese financial practitioners and regulators – has embarked on a series of roadshows across Europe, China, Israel and the United States. A recent trip to New York in April 2019 involved a host of business seminars aimed at marketing Malta as a “leading digital asset hub”, and was attended by top officials of some of the world’s foremost firms dealing with blockchain and DLT investments.

“Blockchain Island”

Malta is one of the few jurisdictions in the world to have recognised the capabilities of Distributor Ledger Technologies. Taking an active role within the industry, it last year approved three bills regulating such technologies, including blockchain, and in the process became a pioneer in forming a supportive ecosystem for blockchain-enabled cryptocurrencies.

With the DLT revolution fully embraced by Malta, it has earned itself the nickname “Blockchain Island” and resulted in various international DLT companies setting up shop there. With a blockchain strategy being set out by the Government to extend the use of DLT to different industries, including healthcare and education, such disruptive technologies are also set to affect the future course of Malta’s capital markets.

“What Blockchain Island has done for us, is give us an opportunity to actually make our mark internationally”, explains the MSE chief.

“People are now very much interested in what the Malta Stock Exchange and what our country is doing.  There are a number of stakeholders here in Malta that are involved in the digital asset space and we’re working together, we’re communicating, to try to create the best eco-system we can. We’re very proud of our regulatory eco-system, our regulatory sandbox. We believe that Malta offers a lot of amazing, cost effective capital market solutions.”

Security Tokens



“By probably the end of 2020 Malta will have the highest concentration of security token exchanges in the world, even more than the United States.” Joseph Portelli, Executive Chairman of the Malta Stock Exchange.

One such solution is that of security tokens, a new tool which promises to revolutionise the world of investment. It is an area of fintech that Malta was quick to regulate through the drafting of digital asset legislation recently passed by government, providing DLT businesses and investors the regulatory certainty necessary to create an environment of trust and innovation.

The concept of security tokens, quite simply, is to provide the ability to buy stock in any security – like a business, a piece of art, property, or bonds – and couple it with the ability to purchase just a fraction of the asset instead of its entirety. The blockchain-backed use is primed to shake up the stock market through its potential to unlock liquidity, enable 24/7 trading, fractionalise ownership and increase market depth.

“The attractiveness of blockchain is it makes the clearing and settlement process for equities, for capital products, so much faster and easier”, explains Portelli.

“For example, the process of proxy voting, it’s expensive, it’s cumbersome, but it can be done very easily on the blockchain. Or [….] if you’re a company and you want to raise a certain amount of assets, you don’t actually have to go through the expensive regulatory filing process. It’s not revolutionising the capital markets as we know them, it’s evolving them. It’s a paradigm shift. It’s going from one extreme to the other.”

Now, through regulation, Malta is building a foundation to become “the epicentre of security token financing”, says Portelli.

“Whenever I meet people who are curious about what we’re doing, I tell them that by probably the end of 2020, Malta will have the highest concentration of security token exchanges in the world, even more than the United States.”

SME financing



“We could be transforming the capital markets in a fashion where you don’t have to be large companies to actually list.” Joseph Portelli, Executive Chairman of the Malta Stock Exchange.

Security tokens are also tipped to have a transformative effect on how small and medium enterprises (SMEs) access finance on the capital markets, with blockchain set to enable a relatively easier listing of smaller organisations on the stock exchange.

“To raise capital on AIM, which is the UK version of an SME exchange, even if you’re looking to raise small sums, it could cost hundreds of thousands, if not millions. It’s an expensive process”, explains Portelli.

“Not only do you have to pay brokers, you have to pay underwriters, you have to pay the regulator, you have to pay the accountants, and the lawyers. With blockchain it can be done so much easier because in many instances you’re cutting out middlemen.”

By regulating security tokens for use in this way, MSE is already excited to be able to offer this alternative form of financing efficiently and cost effectively for SMEs. It is a platform from which Malta can establish itself as the world’s foremost destination for SME financing “within perhaps a year or so”, according to Portelli.

“We’re not trying to reinvent the wheel”, he says. “We’re taking the model of AIM, [and] also a methodology of NOMAD, or nominated advisor. The reason [for this] is to ensure that these companies are ticking the necessary boxes when it comes to governance, risk and compliance.”

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South EU Summit's editorial team is comprised of an international team of journalists and communication specialists with wide-ranging areas of expertise. We pride ourselves in developing firsthand content, and undertaking personal interviews with the most influential players in each market.

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