- MiCA will enable service providers to operate across the EU with a single license.
- The precise regulation changes under consideration in the consultation are aimed at exchanges, custodians, and portfolio managers.
The Malta Financial Services Authority (MFSA) has initiated a public consultation to propose modifications to its digital asset regulations. These adjustments align Malta’s regulations with the European Union’s (EU) Markets in Crypto-Assets (MiCA) regulations, scheduled to take effect in 2024.
Malta, recognized as one of the early adopters of digital asset regulation, is taking proactive steps to facilitate a seamless transition for Virtual Financial Assets (VFA) Service Providers.
Establishment of the Virtual Financial Assets Act (VFAA)
Malta took pioneering steps by enacting the Virtual Financial Assets Act (VFAA) on November 1, 2018.
The VFAA established a comprehensive regulatory framework for digital assets. It encompassed critical aspects such as:
Definition of Virtual Financial Assets: The VFAA clearly defined virtual financial assets.
Licensing System: It established a licensing system under the Malta Financial Services Authority (MFSA) authority.
Obligations for Token Issuers: Token issuers must create and submit white papers outlining their projects.
Anti-Market Abuse Provisions: The VFAA included provisions to prevent market abuse within the digital asset space.
Rules for ICOs: It established specific rules and regulations governing Initial Coin Offerings (ICOs).
Regulatory Standards: The act sets regulatory standards for digital asset exchanges and trading platforms.
AML and CTF Compliance: It mandated compliance with Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) requirements.
These elements collectively formed the foundation of Malta’s regulatory framework for digital assets.
Proposed Amendments
The revised VFA rulebook maintains continuity in several areas while introducing fundamental changes to harmonize with MiCA:
Systems Audit Requirement Removed: The obligation for VFA license holders to conduct systems audits has been eliminated, streamlining compliance procedures.
Capital Requirement Adjustments: The Class 3 and 4 license holders’ capital requirements have been reduced to $133,000 (125,000 euros) and $159,000 (150,000 euros). Class 3 licenses pertain to entities offering custody and administration services for VFAs, while Class 4 licenses are relevant to trustees overseeing collective investment schemes involving VFAs.
Professional Indemnity Insurance: The requirement for professional indemnity insurance has been lifted, potentially reducing operational costs for stakeholders.
Updated Outsourcing Provisions: Outsourcing requirements have been updated to align with MiCA standards and best practices.
Introduction of Wind-Down Plan Requirement: A new mandate necessitates the development of orderly wind-down plans, enhancing risk management practices.
Removal of Risk Management and Internal Capital Adequacy Assessment Report Requirement: The previous obligation for the Risk Management and Internal Capital Adequacy Assessment Report has been removed, simplifying compliance obligations.
Malta’s Proactive Approach
In response to MiCA’s passage by the EU parliament, Malta, known for its proactive stance on digital asset regulation, has chosen to adapt its existing regulations.
Stakeholders are invited to participate in the consultation by offering feedback on the proposed changes, transitionary measures, and potential areas of alignment.
Submissions are open till September 29th, ensuring comprehensive input from all interested parties.
Conclusion
Malta’s proactive approach to aligning its digital asset regulations with the European Union’s Markets in Crypto-Assets (MiCA) regulations demonstrates its commitment to fostering a robust and compliant digital asset ecosystem.
By seeking feedback and making necessary adjustments, Malta aims to ensure a smooth transition while upholding high innovation and investor protection standards.
This move positions Malta as a forward-thinking jurisdiction in the rapidly evolving landscape of digital assets, attracting businesses and investors looking for regulatory clarity and security in their operations.
