The Malta Financial Services Authority, Malta's all-in-one financial regulator, is forming a partnership with CipherTrace Compliance Monitoring that will monitor and manage 'risks' related to virtual asset businesses licensed in Malta using a piece of CipherTrace software that describes itself as supervisory technology or SupTech.

The software does anti-money-laundering, forensic and "blockchain threat intelligence" jobs in the virtual asset business. Joseph Cuschieri, the MFSA's CEO, recently expressed his belief in its usefulness by saying: "The decision has been taken to engage the services of CipherTrace in order to reduce fraud and detect transactions with illegal sources of funds. CipherTrace Compliance Monitoring will provide the MFSA with powerful oversight tools to automate regulatory processes and audit the risk management of virtual asset businesses that are licensed in Malta."

CipherTrace uses machine learning to 'de-anonymise' transactions, which helps regulators to evaluated and monitor the trustworthiness of virtual asset businnesses. It tracks the risk exposure of virtual asset businesses such as crypto-currency exchanges, collective investment schemes and initial coin offerings or ICOs to gauge and measure potential exposure.

Another MFSA regulator said: "This SupTech will allow the MFSA to monitor the activities of crypto-businesses both pre- as well as post-authorisation stage. Crypto-currency businesses often have difficulty establishing trust and maintainin banking relationships because of their perceived risk. Banks and other financial institutions use...CipherTrace...to help decide which virtual asset businesses to trust as corporate customers. These insights help banks avoid de-risking by turning away valuable customers in this lucrative and fast-growing sector."

CipherTrace machine-learning algorithms calcuate risk levels for exchanges, addresses, wallets and other entities based on known associations, criminal addresses and money-laundering services. CipherTrace also profiles hundreds of global exchanges, dark markets, mixers, gambling services, high-yield investment products and automated teller machines to determine risk levels of transactions by looking at activity related to suspicious addresses and wallets.

Cuschieri has also stated recently that his organisation is forming an academy that will teach young financial supervisors and grizzled 'professionals' alike about FinTech, as well as other things. The idea - an idea shared by the Bahamas and almost every other offshore centre on earth - is to establish Malta as an international FinTech hub. A  'regulatory  sandbox' might be in the offing.

The academy ought to be open for business in 2020. The MFSA, moreover, is inviting other regulators to co-operate with it in the field of FinTech. To this end, Cuschieri plans to meet a slew of American and European Regulators shortly.