Malta's financial regulator says ~70% of crypto and blockchain startups applying for a license have given up; insiders say Malta's regulations are too stringent
Adriana Hamacher / Decrypt : Tweets: @daiva_hadiva , @coinbureau , @foundationdrep , and @decryptmedia Tweets: @daiva_hadiva : “But @SilvioSchembri doesn't talk about crypto these days, and his welcome smile is looking strained.” This writer at @decryptmedia found a nice way to communicate the politician's path from radiating openness to voicing xenophobic threats https://decrypt.co/... @coinbureau : Not the best of news out of “blockchain island”. Seems as if those images of a hyped up crypto regulation utopia were a bit overplayed? https://decrypt.co/... #crypto #blockchain #regulation #malta #cryptoisland @foundationdrep : Many #blockchain companies chose to register in the supposed “financial haven” of Malta. However, the island seems not to provide so much as it promised. 70% of #startups failed to obtain a license. On the other hand, enterprises that thrive within the traditional financial ... @decryptmedia : Malta's pioneering crypto regulation is a flop, judging by the roll call of startups that failed to obtain a license. https://decrypt.co/... https://twitter.com/...
Context & Ripple Effects
Malta built its 'blockchain island' pitch during the 2018 race among Bermuda, Malta, and Liechtenstein to legislate crypto firms into residence — friendly rules were the entire product. The regulator now reports roughly 70% of license applicants have given up, and insiders blame the stringency of those same rules.
The attrition lands while Malta is fighting on two other fronts: it opposes EU plans to centralize crypto supervision under ESMA as an assault on its attracting power, and its broader financial-services brand took a hit when the FATF gray-listing put its gambling-hub status at risk.
First-order effects
- Crypto and blockchain startups that began Malta's licensing process are abandoning it, leaving them unlicensed there and forcing a restart in another jurisdiction or none at all.
- The Maltese regulator's own admission that most applicants quit undercuts the government's core selling point just as officials defend the regime abroad.
Second-order effects
- Rival small jurisdictions from the same 2018 cohort — Bermuda, Liechtenstein — become the natural landing spots for defected applicants, competing on processing speed rather than rule leniency alone.
- Malta's resistance to ESMA centralization gets harder to sustain if its domestic regime is visibly shedding the very firms it was designed to attract.
Third-order effects
- If the pattern holds, the small-country regulatory-arbitrage model for crypto collapses: international scrutiny (FATF gray-listing, EU-level supervision) raises the compliance floor faster than boutique jurisdictions can differentiate on friendliness.
- Crypto firms may consolidate toward larger regulated markets with functioning banking access — the direction France moved by guaranteeing blockchain projects a bank account — rather than toward permissive island regimes.
The trend: Small-state crypto havens are losing their edge as compliance costs and supranational oversight outpace whatever advantage friendly local legislation once offered.