MiCA’s Impact on Malta’s VFA Landscape

As part of its package on digital finance, the European Commission launched the Markets in Crypto-Assets (“MiCA”) framework in 2020. MiCA is the main EU regulation that regulates crypto-assets and provides consistency between Member States and is directly applicable without requiring national-level transposition. The Virtual Financial Assets Act (Chapter 590, Laws of Malta), which Malta enacted in 2018, showed that it constituted a progressive state that supported financial innovation. The Malta Financial Services Authority (MFSA) has commenced consultations with relevant parties to guarantee a seamless shift to MiCA following the repeal of the VFA Act.

MiCA’s Crypto-Asset Definition

Markets in Crypto-Assets (“MiCA”) defines a “crypto-asset” as any “digital representation of value or rights that can be electronically transferred and stored, utilising distributed ledger technology or similar methods.” This is a broad definition. Crypto-assets are divided into three subgroups by MiCA:

• asset-referenced tokens (“ARTs”);
• e-money tokens (“EMTs”); and
• other crypto-assets (a catch-all category for tokens that are not ARTs or EMTs) such as utility tokens and other cryptocurrencies including Bitcoin or Ether.

MiCA establishes three distinct but interconnected regulatory regimes, which include:

• a regime for issuers of stablecoins (ARTs and EMTs),
• a regime for issuers of non-stablecoins (other crypto-assets), and
• a regime for entities providing services in respect of crypto-assets, who are referred to as crypto-asset service providers or CASPs in short.

The Impact on Malta’s VFA Landscape

The Malta Financial Services Authority (MFSA) is proactively pursuing measures to guarantee Malta’s preparedness for the implementation of the Markets in Crypto-Assets (“MiCA”). Malta has made significant progress in aligning with the MiCA rules by amending the Virtual Financial Assets (“VFA”) Act. The Virtual Financial Assets (Amendment) Act, 2024, also known as ACT No. XIV of 2024 (the “Amending Act”), announced these revisions on April 16, 2024.

The Amending Act addresses the removal of the VFA Agent role and the introduction of MiCA transitory provisions, ensuring a smooth transition for market participants, thus reinforcing Malta’s position as a premier jurisdiction for crypto-asset issuers and service providers.

The VFA Agent Role Discontinuation

The VFA Agent position has been discontinued by the Amending Act, and the related requirements are now directly placed on Virtual Financial Asset Service Providers (“VFASP”s) and VFA issuers.

Introducing MiCA Transitory Provisions

To facilitate the implementation of the Markets in Crypto-Assets (“MiCA”) Regulation, the Amending Act incorporates particular transitory provisions. Since E-Money Tokens (“EMTs”)  and Asset Referenced Tokens (“ARTs”) are covered by the MiCA Regulation as of June 30, 2024, they are not included in the VFA Act’s definition of Virtual Financial Assets or DLT Assets.

It is crucial for crypto-asset service providers to be aware that the MFSA will no longer accept licence applications under Article 14 of the VFA Act after August 1, 2024. The aforementioned timeframe underscores the necessity for organisations to ensure adherence to regulations well before MiCAR’s official implementation on December 30, 2024.

In Conclusion

With these developments, Malta continues to demonstrate its commitment to embracing financial innovation while upholding regulatory clarity and consistency, ultimately shaping a dynamic and resilient VFA landscape within the European Union.

For additional information please refer to the Virtual Financial Assets (Amendment) Act, 2024, or schedule a consultation with our experts if you need regulatory assistance related to the aforementioned.