MFSA Issues Position Paper on Tokenisation of Fund Units

The Malta Financial Services Authority (MFSA) has taken a significant step towards modernising Malta’s investment fund industry with the publication of a detailed position paper on the tokenisation of fund units or shares of Collective Investment Schemes (CISs). Released on 12 June 2025, the paper sets out the regulator’s views on the use of distributed ledger technology (DLT) to represent traditional fund units as digital tokens.

Paving the Way for Digital Innovation in Malta’s Fund Sector

Tokenisation allows CIS units, including those in Alternative Investment Funds (AIFs), Professional Investor Funds (PIFs), and UCITS, to be digitised via blockchain-based smart contracts. This innovation facilitates more seamless transfers and has the potential to reduce administrative costs. By converting fund units into digital tokens, Malta aims to enhance operational efficiency, broaden investor accessibility, and maintain strong regulatory oversight.

A key element of the MFSA’s guidance is the central role of Fund Administrators, who will be responsible for overseeing both the technological and compliance aspects of tokenised units. Their responsibilities include managing smart contract execution, verifying investor identities in line with Anti-Money Laundering (AML) and Know Your Customer (KYC) requirements, and maintaining a blockchain-based register of unitholders.

Importantly, the position paper clarifies that the legal status of CIS units remains unchanged. They continue to fall under the EU’s Markets in Financial Instruments Directive (MiFID II) framework, rather than the Markets in Crypto-Assets Regulation (MiCAR). This distinction separates tokenised fund units from typical crypto assets.

Summary

The paper also introduces transparency and disclosure requirements, highlighting the need for clarity in offering documents regarding the issuance and redemption of tokenised units, as well as strict adherence to AML/KYC obligations.

For further details, please refer to the MFSA’s position paper on the tokenisation of CIS units.