Malta Fintech and Blockchain in Malta
Malta has launched the first comprehensive legal framework for the creation of a regulatory body to regulate services in the blockchain and fintech industry. The aim of the regulatory approach has been to implement a robust and stringent process which considers the full requirements of AML and KYC regulations, whilst still allowing for encouragement of technological innovation.
The legislation on blockchain based businesses is focused around the Malta Digital Innovation Authority Bill, The Innovative Technology Arrangements and Services Act and The Virtual Financial Assets Act which shall allow for the regulation of cryptocurrencies and virtual tokens, the issuing of initial coin offerings (ICOs), crypto currency exchanges and the myriad of service providers of Distributed Ledger Technology (DLT).
The Malta Digital Innovation Authority Act (MDIA)
The Malta Digital Innovation Authority Act was approved by parliament on the 4th July 2018 and results in the set up of the new Malta Digital Innovation Authority (MDIA). The new Act also empowers MDIA by outlining the powers and functions attributed to the new authority which entrusted with the role of certifying Innovative Technology Arrangements and providing a regulatory framework for system auditors and technical administrators.
The Innovative Technology Arrangements and Services Act (ITAS)
The Innovative Technology Arrangements and Services Act (ITAS) provides for the regulation of designated innovative technology arrangements. Technology Arrangements are defined as software and architectures, which are used in designing and delivering DLT which:
– Uses a distributed, decentralized shared and, or replicated ledger
– May be public or private
– Is permissioned or permissionless
– Is protected with cryptography
– Is auditable
The Innovative Technology Arrangement may also include smart contracts and related applications.
Anyone seeking to obtain recognition for an Innovative Technology Arrangement may voluntarily apply to the Authority by a written application.
The Virtual Financial Asset Act (The VFA Act)
The Virtual Financial Assets Act, 2018 (The VFA Act) puts in the place the legal framework to regulate Virtual Financial Assets or Initial Coin Offerings (ICOs). The VFA Act provides for a definition of what constitutes a Virtual Financial Asset or ICO.
The VFA Act also introduces the mandatory appointment of a Virtual Financial Asset Agent (VFA Agent), subject to a few exemptions and outlines the responsibilities of the said agent. One of the key responsibilities of the VFA Agent is to carry out a financial instruments test on the proposed activity which will give guidance if the proposed activity is exempt from licencing, needs to be licenced under the Investment Services Act or via the VFA Act.
The VFA Act outlines the necessary licence requirements and conditions that must be adhered to by individuals or entities whom issue virtual financial assets or whom provide services in relation to virtual financial assets. This can include investment advisors, custodians, brokers and cryptocurrency exchanges to name a few.
Papilio Services Fintech and Blockchain team can assist clients with:
– The planning and preparation phase for compliance within the new blockchain and cryptocurrency laws.
– Setting up of DLT, Blockchain and Cryptocurrency companies
– Initial Coin Offerings and other Virtual Financial Assets
– Assisting service providers through the licencing process such as crypto exchanges, crypto brokers and crypto advisors