An Article by Michael Schmitt
When Bill 55 was introduced to the Maltese Parliament in 2023, it was presented as a measure to protect the iGaming sector from legal actions originating in foreign jurisdictions, particularly Germany and Austria. The law effectively prevents foreign court rulings from being enforced against Malta-licensed gambling operators, a move that has since sparked concern within the European Union (EU) and beyond.
According to the International Association of Gaming Lawyers #IMGL, Malta has positioned itself as a “legal fortress” for online gambling firms, raising serious concerns about regulatory accountability and compliance with EU principles. While the Maltese government justifies this law as a necessary step to protect economic stability, several reports, including one from Vixio Regulatory Intelligence (Gambling Compliance), highlight the potential risks involved, including damaged international relations and economic instability.
A key question arises: Is Bill 55 truly about protecting #Malta’s legal sovereignty, or does it primarily serve the interests of a powerful industry while exposing other sectors to serious financial and reputational risks?
Table of Contents
Economic Contributions of the iGaming Sector under Bill 55
The iGaming industry has undeniably played a central role in Malta’s economy. PR Newswire reports that in 2022, the sector generated €1.495 billion, accounting for 9.6% of Malta’s Gross Value Added (GVA), with its total economic impact exceeding 12.4% when indirect contributions are factored in.
The Malta Gaming Authority #MGA, which oversees gambling regulations in the country, estimates that the iGaming sector employs over 11,245 individuals, with 92.2% of those jobs being within online gaming.
However, while Bill 55 is aimed at protecting these contributions, critics argue that its benefits may be outweighed by the risks it poses to Malta’s broader financial stability.
According to an #IMGL analysis, the law effectively shields gambling companies from foreign accountability, meaning that gamblers who have won cases against Malta-licensed casinos in Germany and Austria are unable to enforce their legal claims.
The same report states that this situation has worsened Malta’s reputation in European regulatory circles, potentially leading to economic sanctions or further scrutiny from the European Commission.
The Grey List: A Warning Malta Should Not Ignore
Malta was placed on the Financial Action Task Force (FATF) grey list in 2021 due to deficiencies in its anti-money laundering #AML framework. According to The Banker , this classification had severe repercussions across multiple sectors, including finance, banking and foreign investment.
During the grey-listing period, even basic financial services such as opening a Revolut account became significantly restricted, making daily banking operations more difficult for residents and businesses alike. As reported by Morningstar DBRS , foreign direct investment #FDI declined and international banking relationships were weakened, creating a chilling effect on the Maltese financial sector.
With Bill 55 now raising fresh legal concerns, regulatory experts, including those at VIXIO Gambling Compliance, warn that Malta risks being placed back on the grey list, or worse; facing direct intervention from EU financial regulators.
The European Commission has already taken steps to challenge the legality of #Bill55, referring the matter to the Court of Justice of the European Union #ECJ. If the ECJ rules against Malta, the country may be forced to repeal the law or face potential financial penalties, as reported by MaltaToday .
Return to the Grey List Could Affect Malta’s Economy
The Financial Action Task Force (FATF) grey-listing of Malta in 2021 had significant repercussions across various sectors of the Maltese economy, particularly in finance, cryptocurrency and fintech. Understanding the extent of these impacts requires an examination of each sector’s contribution to the economy and the specific challenges they faced during the grey-listing period.
Economic Contributions of Key Sectors
- Financial Services: The financial services sector is a cornerstone of Malta’s economy, accounting for approximately 11% of the Gross Domestic Product (GDP). This sector encompasses asset management, investment funds, insurance, private wealth and corporate services. In the period between 2022 and 2023, the sector experienced a robust growth of 11.8%, contributing significantly to the country’s Gross Value Added (GVA).
- Cryptocurrency and Fintech: Malta has positioned itself as a pioneer in the digital economy, with digital sectors contributing over 20% to the national economy. The government’s strategic investments in blockchain and cryptocurrency have attracted numerous enterprises to the island, bolstering its reputation as a hub for digital innovation.
Impact of FATF Grey-Listing
The FATF’s decision to place Malta on its grey list in 2021 was a response to concerns regarding the effectiveness of the country’s anti-money laundering and counter-terrorist financing (AML/CFT) frameworks.
This grey-listing had several adverse effects:
- Banking and Financial Transactions: The grey-listing led to increased scrutiny from international correspondent banks, with some terminating their relationships with Maltese financial institutions. This heightened due diligence resulted in delays and complications in cross-border transactions, affecting both businesses and individuals.
- Foreign Direct Investment (FDI): The perception of Malta as a high-risk jurisdiction deterred potential investors, leading to a decline in FDI. The uncertainty surrounding the country’s regulatory environment made it less attractive to foreign enterprises looking for stable investment destinations.
- Fintech and Cryptocurrency Ventures: The fintech sector, which relies heavily on international partnerships and investor confidence, faced significant challenges. The grey-listing undermined Malta’s reputation as a secure and innovative hub for digital finance, leading to potential losses in revenue and stunted growth in these emerging industries.
Broader Economic Implications
Beyond the immediate effects on the financial and digital sectors, the grey-listing had wider economic repercussions:
- Tourism: While the direct impact on tourism was less pronounced, the association of Malta with financial impropriety could tarnish its image as a safe and reputable destination. Tourists may perceive the country as less secure, potentially influencing their travel decisions. This could lead to a decline in visitor numbers, affecting the hospitality sector, local businesses and employment within tourism-dependent industries.
- Overall Economic Health: The combined effects of reduced investment, strained banking relationships and a damaged international reputation posed risks to Malta’s broader economic stability. The grey-listing served as a signal to the global community about underlying issues in Malta’s regulatory frameworks, prompting calls for comprehensive reforms. If these concerns are not addressed, Malta could face long-term economic stagnation, making it more difficult to attract new business ventures and financial partnerships.
Quantifying the Trade-Off
While exact figures are challenging to ascertain, a 2021 International Monetary Fund #IMF study found that countries placed on the FATF grey list experience an average decline in capital inflows of about 7.6% of GDP.
Applying this to Malta’s 2022 GDP of approximately €15.5 billion, a grey-listing could result in a reduction of around €1.18 billion in capital inflows. This potential loss nearly matches the total revenue generated by the iGaming sector, suggesting that the economic risks of grey-listing may outweigh the protective benefits conferred by Bill 55. Remember that the iGaming industry would also be affected.
While Bill 55 seeks to safeguard the iGaming industry’s contributions to Malta’s economy, the potential repercussions of renewed FATF grey-listing or EU sanctions could lead to economic losses that surpass the benefits of the legislation. A comprehensive evaluation of these trade-offs is essential for informed policy-making.
The financial, cryptocurrency and fintech sectors, which are vital contributors to Malta’s economy, faced significant challenges due to the grey-listing. Addressing the deficiencies highlighted by the FATF and implementing sustained reforms are essential steps toward restoring confidence and ensuring the continued growth and prosperity of Malta’s diverse economic sectors.
Housing Market Pressures: The Hidden Cost of iGaming
One often-overlooked consequence of Malta’s iGaming boom is its severe impact on the housing market, which has made home ownership and renting increasingly unattainable for ordinary Maltese citizens.
According to Times of Malta , the growing demand for housing from high-income foreign professionals working in iGaming and finance has driven rents and property prices to historic highs, effectively pricing out locals from central areas. The once-affordable rental market has been transformed, with many long-term Maltese residents finding themselves forced to relocate to cheaper, less accessible towns or even leave the country altogether in search of sustainable living costs.
The sharpest spikes in rent and property prices have been felt in Sliema, St. Julian’s, Msida and Gżira, areas that were once considered attractive for both locals and middle-income expatriates but are now virtually off-limits to anyone outside the gaming or financial sector.
PR Newswire writes, that landlords in these regions increasingly prioritize renting to foreign iGaming workers, who can afford to pay significantly above market rates, rather than to Maltese nationals. In some cases, rental prices have more than doubled over the past decade, making it impossible for young Maltese families or lower-income workers to compete for housing in their own country.
Conclusion: A Risk Malta Cannot Afford to Take
While Bill 55 was introduced under the premise of safeguarding the iGaming industry, its potential consequences extend far beyond this single sector. According to various legal, financial and economic analyses, the risk of renewed grey-listing, economic sanctions and reputational damage outweighs the benefits of maintaining this law.
- Malta’s financial and fintech sectors face potential investor flight
- The country’s housing market continues to spiral out of control due to the influx of high-paid foreign professionals
- EU regulators have already begun scrutinizing Malta’s legal frameworks, increasing the likelihood of economic penalties
- Malta’s reputation as a reliable business hub is increasingly at risk
VIXIO Gambling Compliance states: Legal experts and policymakers in Germany, Austria and other EU countries are monitoring Malta’s regulatory position closely and a failure to comply with European legal standards may result in severe financial repercussions.
At its core, Bill 55 is not a measure to protect the Maltese people; it is a legal shield that benefits a select group of companies. The question remains: Is Malta willing to gamble its economic future for the sake of a single industry?
A message from Michael:
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