22 May Interview with Kenneth Brincat, CEO of the Malta Digital Innovation Authority
BF: Malta is among the only four EU countries with projected growth rates of above 1% in 2023. A lot of that is owed to the country’s emerging tech sector, including IT, MedTech, smart manufacturing and gaming. Can you give us an overview of Malta’s current technology and innovation sector? Why is Malta an attractive place for a strong tech industry and what specific sectors is it cultivating?
Kenneth Brincat: Let me first explain what we do and the reason why it was established, because that gives a scenario which would respond to your question. The Malta Digital Innovation Authority (MDIA) was established in 2018, five years ago, with the intent to create a legal framework, at the time, to blockchain. In fact, that law was enacted in 2018, which established the MDIA and also the Visual Financial Act, which is under the regulatory regime of the Malta Financial Services Authority.
The MDIA’s part is to assess the technology, not the service, so not the cryptocurrency service. But what is important for us is that the underlying technology, which is being used by cryptocurrency, for example, which is blockchain, is doing what it should be doing. We assess and certify the technology. This was the first kind of legal framework which was established in the world, not just in Europe. Malta was an early adopter when we are speaking about innovative technologies. We went beyond that. Our foresight was that now there is another technology which is becoming a part of everyday life: AI. Our framework then caters also to AI. It does not have a mandatory role. Therefore, it’s voluntary. The uptake couldn’t be so big because developers don’t want to have their systems regulated.
This is another point here, which is very important: innovation and regulation. Normally, they don’t go hand in hand. Innovation needs space; innovation needs to be dynamic to grow. Regulation sometimes is there to stifle that type of growth. Therefore, that’s one of the biggest challenges which we, as an authority, have. In fact, our remit says that we have to be promoters and facilitators of AI, and, on the other hand, regulators, which is the biggest challenge. The European Union is discussing the AI act and wants to have regulated technology in the member states. We already have that type of regulatory framework. Obviously, it’s not that stringent as much as the European Union is proposing. Because such technology needs space to grow and if the European Union is going to be so stringent, I would be afraid that it will stifle the growth of AI.
What we’ve created, however, is the technology assurance sandbox. We have a sandbox, which is technology neutral, and any type of technology could be tested within a regulatory framework. Let’s say you are developing an AI component, and you would like to see if that software is within the legal framework which the European Union is discussing. You can use our sandbox, and you have different milestones. We discuss with the developer what they want to get from such a sandbox. If they want, for example, to know that they are within that regulatory framework of which the EU will be, we can do that. If you want just to look into the GDPR issue only, you can test your AI before GDPR issues only.
The sandbox is a product which we have which could be a part of the tech hub to be used by investors who would like to come here to develop AI systems. That’s one type of product we have. There are other countries that have such sandboxes, but they are not as technology neutral as ours. Mostly, they are dedicated to AI, because that’s the most popular technology at the moment. But ours is technology neutral. We are targeting it now for metaverse, for example, and other types of technologies such as IoTs.
BF: MDIA recently launched its strategic plan for 2023-2025. Can you tell us what is included in this plan, and what main hurdles will the MDIA have to overcome to reach its targets?
Kenneth Brincat: Our strategic plan was launched very recently. First of all, after five years we thought that now we need to have a new strategic plan, one which will give us direction for the three coming years. Even three years in technology is a lot, because technology, especially innovative technologies, is so dynamic that you need to have not too much long-term strategy; you should have a strategic direction, and you review it every year or even every six months. That was the first line of thought that we went on.
If you look into our strategy, you will understand that the MDIA, rather than being a regulator is more looking to provide technology assurance and facilitate the optimal use of technology. This goes with what I was saying before when I mentioned that regulation stifles innovation, and we have to be careful there. Our strategic direction is not just “we want to regulate”: there is a technology, and we have to do rules on how to do this or that. No! We will put on policies and standards, something which is different. Standards are important and very popular in technology. If you’re speaking about financial services, then there you need regulations. But standards are different from regulations. Rather than putting in regulations, we’re looking into doing standards: let’s assist the businesses by giving them policies in cybersecurity, for example, which they can follow to have a better system. That’s why we have four pillars in our strategic plan, which are policy, service provision, communication, and governance. Governance will be associated with regulation, even though we’ve been careful not trying to use words which would scare off investment.
Sometimes, countries end up creating legal frameworks or regulatory frameworks to attract business. Malta has done that with the cryptocurrency. We want this new economic niche: what do we do? A legal regulatory framework! The strategic plan is addressing this differently. It is saying no: first, attract, first, offer the assistance, the incentives, then when you have the market, with the industry already there and it needs to be regulated, then provide that. But first, you need to assist by giving grants, by giving tax incentives, by assisting also in providing expertise, in mentoring the startups embarking in new technologies. That’s the rationale of our strategic plan. Obviously, the biggest challenge would be that being an authority, people look at us as a regulatory body. That’s why one of our pillars is communication; it’s to communicate that we’re there to help, not to stifle what you’re trying to do.
BF: Since it was founded in 2018, MDIA has overseen policy changes to make the market more attractive for tech activity and ensure transparency and protection. How has the MDIA had an impact on priming Malta’s tech and innovation sector in terms of policy, and what current key legislation is the organization working on?
Kenneth Brincat: At the moment, we’re working on a new legislative framework which hopefully will be discussed by the parliament. Our plans are discussed in April-May this year. Actually, we are in the final phases in terms of these bureaucratic issues to have it presented.
The new legislative framework would change how it is done today from a legal framework perspective. What we are saying is, let’s have a one umbrella act, which is the MDIA act, which empowers the MDIA to have other guidelines, to have other subsidiary legislations with any kind of technology, because as it is today, we can only regulate or offer a service, DLT, AI or critical solutions and smart contracts. That’s our aim at the moment, which is very limited.
For Malta to be more agile, which is very important in FDI, you need to have all legal frameworks in place. Let’s have an MDIA act which empowers the MDIA. Then you have subsidiary legislations. As we have subsidiary legislations, we will have one about cyber security, or we will have one about AI once the EU legislates (we will have one that we just transpose from the EU act). We already have our law which empowers that, but we need to change it. We decided to have a separate piece of legislation, which responds to the umbrella act, and that is the MDIA act. And any other: for example, if we decide to have regulations about the metaverse, we just have this type of law and then do not have to go to the parliament. The system is very difficult; you need at least one year to do it, which, in FDI, would be a waste of time to attract investment. What we’re trying to do is to simplify the process in legislating any regulation related to innovative technologies. That’s one of the projects we’re working on.
We also have, and this is very important, a national AI strategy. Malta was one of the first to have a national AI strategy way back in 2019. The national AI strategy division was planning to 2030, but as I said, this is a very dynamic concept technology, so the term for the strategy was pushed up to 2022. We gave time until 2023 because of the pandemic, so we will fully implement it by this year. Later on, we will be drafting a new national AI strategy for the coming three years.
We are working also on a framework, Technology Assurance Assessment Framework (TAAF). It’s a national framework, but, in our opinion, after some studies, we found out that Malta needs an authority which assesses technology and has it certified, and it will be very flexible. The MDIA strategic direction is to be flexible. The TAAF will have different levels, depending on the applicant: if it’s an SME, there will be a type of policy to follow; if it’s a bank, that is different work according to the risk. There will be levels according to the risk, these being about how big the entity is and also how complex the system is. The TAAF will assess practically the ISO where you get certified. But we will have a national scheme which gives value to our particular system. We are a European Union country. If you are a U.S. company and you want to grow in Malta, you want to have some kind of recognition from a European country for the system that you have, and we can offer that.
BF: Malta has worked hard to build an attractive market for FDI, both in terms of legislation and support networks. How significant of an impact is FDI having on growing the country’s tech and innovation sectors, and what latest opportunities are we seeing in the market that might be of interest to U.S. and other global investors?
Kenneth Brincat: If I were a U.S. investor, I would look to Malta and I would say what I would get in return: why should I go there to invest in tech? One of the first reasons is our digital ecosystem. We are very small. If you want to employ people, you want to set up a company, and there are all these bureaucratic things that you would need, wherever you go. Our ecosystem is very flexible. For example, you can establish a company in 24 hours if you have everything in place. We have an ecosystem which helps you, as an investor, to invest in Malta. Those are reasons for the investor.
Now, why in tech? Malta is tech-oriented in the sense that the public sector helps. If you want to invest in technology, we try to do everything to make it happen. These are important factors for FDI. You have the Board Enterprise which gives you incentives, you have the Industrial Innovative Solutions which can give you the location, there are tax incentives, and you have the MDIA which could assist you if that particular technology that you want to invest in has the necessary market in Malta. If it does not, we will assist you to promote it, together with Tech.mt. There is an ecosystem which is tech oriented.
Another issue is that Malta, although we are very small and you might be finding it difficult to find the right people to do those particular jobs, our skills and our knowledge in innovative technologies are quite good when you compare them to other countries. When, in 2018, Malta decided to take the road to promote DLT and later AI, the educational institutions created a number of courses in blockchain and in AI which became very popular with students. We do have the knowledge in our country. The problem is that they might go abroad because there might not be enough work for them here. But we do have a lot of knowledge and people with the right skills to employ and to engage, especially in innovative technologies like AI and even now in eSports and game development. That’s another popular niche. Unity has a branch here. Microsoft has offices here. Malta is attracting investment in tech. Hopefully, we get more large players to come to invest here.
BF: You were appointed as CEO back in 2021 and have since successfully led MDIA toward taking more action and having more impact on the country’s economy. You were previously COO of the Malta Business Registry. What are your top three priorities as CEO of the MDIA, and what kind of vision do you have for Malta’s tech industry in the next five to ten years?
Kenneth Brincat: Before being COO of the Malta Business Registry, I spent a lot of time, around 18 years, in local government. From my experience in local government, you learn to be very close to people. When I take that experience and apply it to today, which is tech related, I hope that in 5-10 years’ time, technology, which is already helping people, will be an integral part of each citizen, whereby then, an authority like MDIA would become more fundamental than it is today, because it would provide the assurance. For Malta, I would like to see that this growth in technology will continue and become even more a part of our lifestyle.
BF: What would be your final message for the readers of USA Today and the U.S. market particularly?
Kenneth Brincat: Come to Malta because you can invest, grow and expand or diversify your product here and you will find anything which a businessperson will look for: an easy way how to do business, a tech-oriented country, and a good place to live.