Required Contents of the Whitepaper in terms of the New VFA Bill being proposed in Malta

On the 22 May, the Government of Malta published three Bills that shall be the basis of the regulatory framework for blockchain and cryptocurrency related services.

Schedule 1 of the Virtual Financial Assets Bill lays out the required contents of the White Paper. The Bill states that the whitepaper must contain the information which, according to the particular nature of the issuer and of the virtual financial assets offered to the public, is necessary to enable investors to make an informed assessment of the prospects of the issuer, the proposed project and of the features of the virtual financial asset. It also states that such information must be presented in an easily analysable and comprehensible form.

The Whitepaper must be drafted in English and should contain the following:

• a non-technical summary inclusive of a number of warnings;
• names, functions and declarations by the persons responsible for the whitepaper that to the best of their knowledge the information contained in the whitepaper is in accordance with the facts and that the whitepaper makes no omission likely to affect its import;
• a description of the reason behind the initial virtual financial asset offering;
• detailed technical description of the protocol, platform and, or application, as the case may be, and the associated benefits;
• detailed description of the sustainability and scalability of the proposed project;
• associated challenges and risks as well as mitigating measures thereof;
• detailed description of the characteristics and functionality of the virtual financial assets being offered;
• detailed description of the issuer, VFA agent, development team, advisors and any other service providers that may be deployed for the realisation of the project;
• detailed description of the issuer’s wallet/s used;
• description of the security safeguards against cyber threats to the underlying protocol, to any off-chain activities and to any wallets used by the issuer;
• detailed description of the life cycle of the initial virtual financial asset offering and the proposed project;
• detailed description of the past and future milestones and project financing;
• detailed description of the targeted investor base;
• exchange rate of the virtual financial assets;
• description of the underlying protocol’s interoperability with other protocols;
• description of the manner funds raised through the initial virtual financial asset offering will be allocated;
• the amount and purpose of the issue;
• the total number of virtual financial assets to be issued and their features;
• the distribution of virtual financial assets;
• the consensus algorithm, where applicable;
• incentive mechanism to secure any transactions, transaction and/ or any other applicable fees;
• in the case of a new protocol, the estimated speed of transactions;
• any applicable taxes;
• any set soft cap and hard cap for the offering;
• the period during which the offer is open;
• any person underwriting or guaranteeing the offer;
• any restrictions on the free transferability of the virtual financial assets being offered and the DLT exchange/s on which they may be traded, to the extent known by the issuer;
• methods of payment;
• specific notice that investors participating in the initial virtual financial asset offering will be able to get their contribution back if the soft cap is not reached at the end of the offering and detailed description of the refund mechanism, including the expected time-line of when such refund will be completed;
• detailed description of the risks associated with the virtual financial assets and the investment therein;
• the procedure for the exercise of any right of pre-emption;
• detailed description of the smart contract/s, if any, deployed including inter alia the adopted standards, its/their underlying protocol/s, functionality/-ies and associated operational costs;
• if any smart contract/s is/are deployed by the issuer, details of the auditor who performed an audit on it/them;
• description of any restrictions embedded in the smart contract/s deployed, if any, including inter alia any investment and/or geographical restrictions;
• the program agents used to obtain data and verify occurrences from smart contracts (also known as ‘oracles’) used and detailed description of their characteristics and functionality thereof;
• bonuses applicable to early investors including inter alia discounted purchase price for virtual financial assets;
• the period during which voluntary withdrawals are permitted by the smart contract, if any;
• description of the issuer’s adopted white-listing and anti-money laundering and counter financing of terrorism procedures in terms of the Prevention of Money Laundering Act and any regulations made and rules issued thereunder;
• intellectual property rights associated with the offering and protection thereof; and
• the methods of and time-limits for delivery of the virtual financial assets:

The Malta Financial Services Authority (MFSA) shall have the power to waive or modify any of the above requirements within the context of a particular initial VFA offering or a particular application for admission to trading on a DLT exchange, as the case may be. The Bill also allows for some exemptions from the above requirements.

The Whitepaper shall also include details of the issuer, its board of administrators and its principal business.

The MFSA’s approval shall be valid for 6 months.

Please feel free to contact us at blockchain@whpartners.eu should you require any further information.