Update to the Virtual Financial Assets Act

As June approaches, the Markets in Crypto Assets Regulation (“MiCA”) implementation date approaches with it. MiCA’s provisions on Asset-Referenced Tokens (“ARTs”) and Electronic Money Tokens (“EMTs”) will come into force by the end of June 2024 , while the provisions related to crypto-asset service providers will come into effect at the end of 2024. In preparation for this, the Malta Financial Services Authority (the “MFSA”) has issued a circular to explain its approach regarding the upcoming changes.

On the 18th of April 2024, the MFSA issued a circular explaining the changes which are to be made to the Virtual Financial Assets Act (the “Act”). In 2018, when the Act was first enacted, the legislators saw it fit to create the role of the Virtual Financial Assets (“VFA”) Agent as an intermediary between the MFSA and the person applying to become a VFA service Provider.

With the amendments to the ict, this role is to be removed, and the responsibilities of the VFA Agent to shall be shifted to the VFA services providers and issuers. The MFSA understands that there are ongoing applications which still employ a VFA Agent, and to this end, the VFA Agent may continue providing its services with regards to that particular application, until the MFSA may issue a decision on it. The Act shall allow the VFA Agent in this situation to continue offering its services for three months from the enforcement of the amending act, or until the MFSA issues a decision in relation to said application. This three-month deadline shall also be applicable to all other VFA Agents, who will need to submit a VFA Deregistration form and cease providing the activities of a VFA Agent. Furthermore, where an application has been submitted, a notice must be provided to the MFSA to notify whether or not they will be continuing with the application.

At present, the Act states that any “form of digital medium recordation that is used as a digital medium of exchange, unit of account or store of value” and which cannot be classed as electronic money, financial instrument or a virtual token shall be classified as a VFA. This would mean that ARTs and EMTs could fall within the scope of the VFA definition and as such, the amending act shall carve out ARTs and EMTs from falling within this definition.

It should be noted that any person who wishes to submit an application for the provision of a VFA service under the Act, may still do so until the 1st August 2024.