How small countries like Bermuda, Malta, and Liechtenstein are racing to become the go-to destination for cryptocurrency firms by passing friendly legislation
Nathaniel Popper / New York Times :
Context & Ripple Effects
In 2018, the race was just starting: Bermuda, Malta, and Liechtenstein were writing bespoke crypto legislation to pull in firms that traditional financial centers wouldn't touch, betting that friendly rules could substitute for scale. Malta had the most to prove — it was already Europe's online-gambling hub and wanted to repeat the playbook, even as its addition to the FATF gray list put that reputation at risk.
The follow-on coverage shows how the bet played out unevenly. Malta's regulator later reported that roughly 70% of crypto startups applying for a license gave up, with insiders blaming over-stringent rules — and Malta went on to fight EU plans to centralize crypto supervision under ESMA as an assault on its attraction strategy. Meanwhile the destination map widened: the expanding US regulatory crackdown pushed companies toward Singapore, Hong Kong, Dubai, and Europe, and Abu Dhabi has since drawn named firms like Copper, Paxos, and eToro.
First-order effects
- Crypto firms gain a menu of purpose-built licensing regimes outside the US and major EU centers, letting them incorporate where the rules are written for them rather than against them.
- Bermuda, Malta, and Liechtenstein convert legislative speed into a direct economic pitch — jobs, registration fees, and a new industry to replace or supplement existing pillars like Malta's gambling sector.
Second-order effects
- Supranational bodies push back against jurisdiction shopping: the EU's plan to centralize crypto oversight under ESMA is precisely aimed at stripping small members of their regulatory-competition advantage, and Malta's open opposition signals the fight ahead.
- Competition among host countries escalates into a global bidding war for crypto domiciles — Abu Dhabi, Lisbon, Dubai, and Singapore each now court the same fleeing firms with tax breaks, quality-of-life incentives, and friendlier regulators.
Third-order effects
- If the pattern holds, crypto regulation becomes structurally multi-jurisdictional: firms shop for charters the way shipping companies flag vessels, and enforcement power migrates to whichever bloc can standardize rules across borders — with FATF-style gray-listing as the main lever against pure light-touch regimes.
- The viability of the small-country model is already in question: Malta's experience suggests that writing friendly laws is easy but operating a credible licensing regime is not, pushing the winning jurisdictions toward either deeper institutional capacity or consolidation under larger blocs.
The trend: Crypto domicile is becoming a competitive market among jurisdictions, where small states move first with tailored legislation and larger blocs respond by trying to consolidate supervision.