Consultation Document on the regulations to be issued under the VFA Act

The MFSA has published a consultation document on the proposed draft legal notice (“Consultation Document”) which serves as setting out supplementary rules to the (“VFA Act”) regulating Virtual Financial Assets (“VFAs”).

The Consultation Document provides information on:

Classes of licenses under the VFA Act

Under the VFA Act, a person providing services in relation to VFAs (“VFA Services”) should apply to one of the four types of licenses available under the VFA Act, according to the services provided.

Applicable fees

The Consultation Document provides information on the fees which will be applicable in relation to:

  1. holding a licence under the VFA Act;

  2. registration of the Whitepaper of an Initial VFA Offering;

  3. authorisation to provide the services of a VFA agent.

​The above will be subject to a one-time application fee, which is non-refundable and is payable irrespective whether the application for a license, registration or authorisation is accepted or refused. The above will also be subject to an annual supervisory fee.

Exemptions from licensing

The Consultation Document sets out an exhaustive list of persons who may be exempt from requiring a license in terms of the VFA Act to provide certain VFA Services.

This list provides instances where the person providing the services is automatically exempt, whereas there may be instances where such exemption is not automatic and must be notified to the MFSA or else is subject to the determination of the MFSA whether such person should be exempt or not.

Control of customers’ assets

The proposed legal notice sets out provisions aimed at providing customers protection when their money, VFAs or other assets are held with a person in possession of a license under the VFA Act.

These additional requirements applicable to license holders controlling or holding customers’ money or assets deal mainly on the following:

  1. Subject persons must ensure that it is clear that the customer’s assets held constitute a distinct patrimony from that of the subject person;

  2. Creditors of the subject person have no right or claim over the assets of the customer held by the subject person;

  3. Subject persons must ensure the safeguarding of assets held on behalf of customers and to account and keep adequate records of all customers’ assets held;

  4. Rules when subject persons elect to delegate the holding of customers’ assets to third parties.

Administrative penalties and appeals

The MFSA may impose administrative penalties for failure to comply with the VFA Act and related regulations, in terms of article 48 of the VFA Act. Such imposition of administrative penalties is made by notice in writing and without recourse to a court hearing. However, the subject person has a right of appeal from such decision to the Financial Services Tribunal.

The Consultation Document is open for consultation until 20th July where interested parties may submit their feedback on the provision of the proposed legal notice.

We will be providing more in-depth information on the Consultation Document in the coming days, and updates on the consultation process.

In the meantime, please feel free to contact us should you require further information on the above or on the Consultation Document.