The Malta Financial Services Authority (MFSA) has now published the third and final chapter of the Virtual Financial Assets (VFA) Rulebook. To this effect, Malta has now a fully-fledged regulatory framework to support the innovation and technologies for financial services in the area of crypto-assets.
This is part of the MFSA’s FinTech Strategy that seeks to propel Malta as an international FinTech hub that supports financial technology innovation within a regulatory environment. In fact, among the core values that the MFSA seeks to promote, one can find effective investor protection, financial market integrity and financial stability.
The newly-published rules complement the three pioneering legislative acts that came into force in November 2018, being the Virtual Financial Assets (VFA) Act, the Malta Digital Innovation Authority Act and the Innovative Technology Arrangements and Services Act. Due to the overlap with Financial Services legislation, the MFSA also devised a Financial Instrument Test so as to determine whether the asset in question falls under (a) any of the existing EU Financial Services legislation (notably MiFID II), (b) the new Virtual Financial Assets Act or (c) is otherwise exempt.
Collectively, such laws form the backbone of the Maltese regulation for the FinTech industry. The main highlights of the regulatory framework include the introduction of a robust licensing system for a number of players in this industry, licensing and auditing of smart contracts, and the creation of an authority empowered to oversee such regulation. To this effect, regulations encompass both the aspect of the offering of the services as well as the technology itself. The laws and MFSA regulations deal extensively with Initial Coin Offerings (ICOs) as well as the licensing of services in relation to VFAs, such as crypto-exchanges. The working technicalities, prudential requirements and licensing conditions are then reflected in the newly-published rules of the MFSA. The latter also delegated a good part of its regulatory-compliance work to licensed agents (VFA Agents) who ensure that the players in the industry maintain extremely high standards as required.
At the moment, the MFSA is in the final stages of issuing the first licenses to the approved VFA Agents. The latter will be responsible to process the licensing application forms on behalf of the applicant with the MFSA. Once VFA Agents are granted a license, prospective applicants (ICOs, crypto-exchange platforms etc) can submit their whitepapers and license applications to the MFSA in order to operate their respective businesses from Malta in connection to crypto-assets.