Crypto investors try forming first regulated bank, in Malta

Binance, one of the world’s biggest cryptocurrency exchanges by traded value, is seeking to lay the groundwork for a new bank whose owners will be digital-coin investors, Cindy Wang and Todd White reported on Bloomberg last week..

The crypto-friendly island of Malta will be home of the future Founders Bank, Binance said, adding that it has taken a 5 percent stake alongside other anchor investors at a €133 million premoney valuation, in emailed comments to Bloomberg.

The effort to bridge the digitaltoken industry with conventional banking is the latest push by Binance, whose Chief Executive Officer Changpeng Zhao last week said his platform expects a profit of $500 million to $1 billion in 2018.

Binance and other promoters of the blockchain-based Malta project said they aim to turn the start- up into the first decentralized and community-owned bank in the world -- provided it gets the necessary permits.

Founders Bank would conduct its offering through the blockchain-based equity fundraising platform Neufund, issuing its own “legally-binding equity tokens.” The bank would need a licence from regulators in Malta, a member of the European Union, and approval from the European Central Bank.

“This is fascinating, as a concept,” said Marc Ostwald, global strategist at ADM Investor Services International in London. “Obviously, they’ll have to meet anti-money-laundering regulators. The question will be, how do regulators view this?”

Ostwald said local supervisors’ approach may differ from that of the ECB. An ECB spokesman declined to comment.

“We are honoured to be chosen as the location of the first global community-owned bank,” said Silvio Schembri, junior minister for financial services, digital economy and innovation within the Office of the Prime Minister of Malta, according to a Binance statement last week.

The equity-token sale would be conducted under German regulations in collaboration with one of Europe’s major stock exchanges later this year, Binance said, without identifying the exchange.

The news comes a week after Malta passed three laws aimed at encouraging blockchain-based businesses to set up in the country. Binance said in its statement that the bills “created a fertile environment for blockchain companies and cleared the uncertainties surrounding the market for decentralized assets.”

“I don’t think it’s out of order to call this a seminal moment,” ADM’s Ostwald said.