The Regulatory Regime for Cryptocurrencies in Malta – Part I

Being at the forefront in regulating the cryptocurrency sector, Malta has implemented several regulations which provide a regulatory framework for service providers to operate, while also ensuring that investors are protected. In this article we shall be taking a brief look at the laws and regulations promulgated in Malta by analysing the aim behind their implementation.

The Virtual Financial Assets Act

The Virtual Financial Assets Act (the “VFA Act”) enacted on the 1st November 2018, lays the foundation for the regulatory framework laid in Malta. The VFA Act symbolises the progressive approach taken by Malta in regulating blockchain and Distributed Ledger Technology (“DLT”). The VFA Act creates legal certainty as to the classification of every DLT asset, provides a licensing regime, and a regulated environment to entities providing services in relation to DLT assets which are classified as Virtual Financial Assets (“VFAs”). Moreover, the VFA Act enforces investor protection by requiring entities issuing DLT assets classified as VFAs to register a whitepaper with the Malta Financial Services Authority (the “MFSA”) containing minimum stipulated information as per Appendix I of the VFA Act.

The Malta Digital Innovation Authority Act

Having an authority which is responsible for promoting all governmental policies that promote Malta as a centre for technological innovation is essential. This task is headed by the Malta Digital Innovation Authority (“MDIA”), which is established through the Malta Digital Innovation Authority Act (“MDIA Act”). The MDIA is responsible for the certification of technology arrangements, for the registration of their service providers and for the promotion of DLT utilisation. Furthermore, setting and enforcing standards that ensure the protection of consumers and investors, while ensuring compliance with any other international obligations are also functions of the MDIA.

The Innovative Technology Arrangements and Services Act

In addition, the Innovative Technology Arrangements and Services Act (the “ITAS Act”), regulates the recognition and certification of DLT platforms and smart contracts, providing a tangible proof of quality and standards maintained by the relevant DLT platforms. The ITAS Act also regulates service providers in relation to these technology arrangements, such as system auditors and technical administrators.

Apart from the above-mentioned laws, the MFSA has implemented rules for entities delineating in detail the licensing process for VFA service providers and their ongoing obligations. These rules, combined with the already-existing laws provide interested parties with a robust framework and a clear regulatory regime for crypto-regulation in Malta.

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