Malta is set for its first blockchain based banking system with Maltese company RnF Finance recently applying for authorisation to act as a credit institution.

If the application is approved by the Malta Financial Authority Services (MFSA), RnF Finance Limited will open the first bank of its kind with the assistance of OK Blockchain Capital, the subsidiary of investment company OK Capital Group.

RnF Finance, headed by banker Roderick Psaila, plans to transact, dispense and provide credit for cryptos to high net individuals and Blockchain firms.

While Malta is pushing to become the blockchain capital of the world, pressure is growing on the EU to outlaw cryptocurrencies. A number of countries, including India, Russia and China have banned or are in the process of banning the usage of ‘private’ cryptocurrencies such as Bitcoin.

Earlier this year, The Shift News reported that crypto-exchanges which moved to Malta before October can operate until 2020 without complying with anti-money laundering (AML) and market manipulation rules.

Recently, the CEO of Allianz Global Investors Andreas Utterman said that cryptocurrencies should not be regulated by governments. “Cryptocurrency should be outlawed. I am surprised that regulators haven’t put in more effort in the industry,” he said.

The current trend in Europe is moving towards stringent regulation to oversee the application and usage of cryptocurrencies in European markets. Financial Action Task Force (FATF) – the global watchdog for money laundering – will set up its first cryptocurrencies rules by June 2019 to combat the use of digital money for money laundering, terrorism financing or other crimes.

But legal experts in anti-money laundering warned that challenges remain in tracing the true owner of cryptocurrencies.

Europol, the European Union Agency for Law Enforcement Cooperation, estimates that about 3-4% of the £100bn in illicit proceeds in Europe are laundered through cryptocurrencies.

It said that proceeds from criminal activity are being converted into bitcoins, split into smaller amounts and given to people who are seemingly not associated with the criminals but who are acting as “money mules”.

These money mules then convert the bitcoins back into hard cash before returning it to the criminals.

According to a Wall Street Journal report some 46 cryptocurrency exchanges around the globe assisted criminals in laundering more than $88 million over the past two years.