Binance is helping to launch a new decentralized bank which will be owned by digital coin investors. The jurisdiction is crypto friendly Malta, which just this week attracted criticism from the European Banking regulator.
Founders Bank will have token based equity to be released on the fundraising platform Neufund. They are yet to announce details about the token issue. However, it will come under German regulation with a European stock exchange later this year. André Eggert from German commercial lawyers Lacore is the legal architect for Neufund.
The bank plans to serve tech and crypto businesses. The latter have a hard time getting good banking relationships. Founders will provide conventional services like mobile and desktop banking, a Founders Bank credit card, and presumably linked to crypto. They are awaiting a Maltese banking license and aim to launch in the first half of 2019.
This week TokenPay announced that it owns 9.9% of German Bank WEG, and LiteCoin owns another 9.9%. TokenPay has an option to buy up to 90% of the bank, though WEG currently has a conventional corporate structure.
Crypto exchange Binance went from launch to the highest trade volume in just five months. They expect to make $500m – $1billion in profit this year. It recently moved to Malta which also hosts the second highest trading volume exchange, OKEx. Binance’s CEO was previously CTO at OKCoin which operates OKEx. Both exchanges faced questions about their trading volume figures.
The new Chairman is Michael Bianchi of Bianchi Group and is a former director of the Malta International Airport. He said: “We’re proud to announce our progressive banking solutions tailored for the needs of decentralized companies, with already existing support from the leaders of the blockchain industry, including Binance and Neufund.”
The supervisory board consists of Dr Abdalla Kablan (Chairman Blockchain Committee Malta Stock Exchange), Martin Bruncko (European Commission Innovation advisor), André Eggert (German lawyer, Partner Lacore, advisor Neufund), Pavel Bodark, Sonal Kadchha, Paula Pandolfino (Maltese investment banker, Bianchi director) and Jonathon Gowen (UK based Private Banker to UHNWI).
Changpeng Zhao, Founder & CEO at Binance commented: “We are not only excited to be one of the first investors of this inclusive community for this pioneering initiative, but also look forward to explore the full range of its banking services.”
“We continue to be delighted by the vibrant blockchain opportunities in Malta, and look forward to launching more partnerships in the region.”
Silvio Schembri, a Maltese Junior Minister, said: “We are honored to be chosen as the location of the first global community-owned bank that cares so deeply about transparency and regulation.”
Malta’s crypto friendly regulations
Last week Malta passed three blockchain bills including the Innovative Technology Arrangement Bill and Services Act. The new law recognizes Decentralized Autonomous Organizations or DAOs as a new type of legal entity. They call them “Certified Innovation Technology Arrangements”. DAOs operate without a conventional board of directors with software code programmed to make all decisions.
Some argue that we’re not yet ready for DAOs.
There will also be a new regulatory body called the Maltese Digital Innovation Authority. Its role will be to audit smart contract code.
While Malta is one of the most crypto friendly jurisdictions, getting past the regulators when it comes to a banking license may not be entirely within Malta’s control.
Malta in regulatory spotlight
The news comes just a day after the European Banking Authority (EBA) issued a critical report about Malta. The EBA concluded that Malta failed to effectively supervise Pilatus Bank for Anti Money Laundering and Countering Terrorism Financing regulations.
In March the Pilatus bank chairman was arrested for breaching US economic sanctions against Iran.
Late last year Maltese journalist Daphne Caruana Galizia died in a car bombing after repeatedly writing about alleged corruption in Malta.
A month before her death she commented on Pilatus Bank: “a few weeks after Manfred Galdes resigned as director of the Financial Intelligence Analysis Unit (FIAU) last year, the acting director wrote to Pilatus Bank saying the FIAU no longer had any issues pending with the bank.”
Exploring her website, the events prior to her death read like an explosive novel.
The journalist alleged that Michelle Muscat, wife of Prime Minister Joseph Muscat, owned Panamian company Egrant. The reporter also claimed that Egrant received millions of dollars from a company linked to the ruler of Azerbaijan. The money was sent from Pilatus Bank.
Caruana Galizia’s source at Pilatus was Maria Efimova. Efimova alleged that her family was intimidated before fleeing Malta where Greek authorities arrested her at Malta’s request.
In turn, Prime Minister Muscat claimed it was all a Russian plot to destabilize his government.
Amongst all these allegations, there is at least one fact: Caruana Galizia was murdered.
The European regulator is tightening its oversight of Maltese banking regulation. They’ve issued a ten-day ultimatum to Malta to inform them of fixes they plan to institute. So it might not be the perfect time to apply for a banking license in Malta.