Malta’s prime minister is doubling down on the booming blockchain industry in a bid to diversify the European Union’s smallest economy — and to even fight corruption.

“We’re taking a calculated risk,” Prime Minister Joseph Muscat said in an interview Sept. 10, by cutting “layers of bureaucracy” and offering fast-track approvals for digital players to set up shop on the island.

With tax rates as low as 5 percent, the government recently passed laws that seek to ease the trading...