What You Have to Know about Malta Regulation?
In one of our previous Medium stories, we announced that we moved our operations to Malta which is becoming a leading blockchain haven in the European area. Malta has recently approved three acts that will establish a robust framework for regulating crypto landscape.
First in a row is Malta Digital Innovation Authority (MDIA) Act that is to provide for the establishment of an Malta Digital Innovation Authority, in order to support the development and implementation of the guiding principles to promote consistent principles for the development of visions and skills relating to decentralised technology, and to exercise regulatory functions.
Second, Innovative Technology Arrangements and Services (ITASA) Act which will provide for the regulation of designated innovative technology service providers and certification of technology arrangements that will be exercised by the Malta Digital Innovation Authority.
And the last, The Virtual Financial Assets (VFA) Act which focuses on ICOs and the regulation in respect of certain service providers like brokerages, portfolio managers, exchanges, traders etc., which will be involved in activities related to ICOs.
The most anticipated piece of legislation is without any doubt the last. VFA Act will provide legal certainty and guidelines to the industry by performing Financial Instrument Tests and requiring obligatory VFA Agents whose task will be overviewing the whole procedure of licensing. Furthermore, this is the Act under which we will try to acquire licensing for a bundle of services we are about to offer with the launch of the next generation RIALTO.AI platform.
Financial Instrument Test
Malta Financial Services Authority has proposed Consultation Paper on the Financial Instrument Test whose objective is to offer guidelines on how to distinguish what are commonly recognized as ‘security and utility tokens’. Based on their specific features, they are covered either by:
- the existing EU legislation and the corresponding national legislation,
- the proposed Virtual Financial Assets Act or
- are otherwise exempt.
That is to say that the test defines three types of Distributed Ledger Technology (DLT) Assets:
- Financial instruments falling under MIFID II that are qualified whether as a transferable security, a money market instrument, a unit in a collective investment scheme, a financial derivative, or an emission allowance.
- Virtual Tokens which are not traded on exchanges and have no utility or any value outside of the DLT platform on which its is issued and consequently, fall outside the scope of regulation.
- Virtual Financial Assets that are being used as instruments of payment and will be regulated under the new VFA Act.
It is envisaged that the test will be applicable both within the context of an ICO as well as during the intermediation of DLT assets by persons undertaking certain activities in relation to such assets in or from within Malta.
VFA Agent
At the moment when VFA Bill enters into force, newly launched ICOs will have to be registered with Malta Financial Services Authority. The ICOs and license applicants will then have six months to comply with the transitory provision. This process requires to appoint and have in place a VFA agent (lawyer or a firm) at all times who is ensuring and confirming that the documentation is being prepared in compliance with the VFA Act. Moreover, an application for a license under the VFA Act shall be made solely through a VFA agent who should serve as a legal watchdog on the ICO to ensure its legal compliance.
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