On the 26 June 2018, Maltese Parliament approved the three bills regulating blockchain technology, initial coin offerings (ICOs) and cryptocurrencies. One of the bills – the Virtual Financial Assets Act (VFAA) creates a framework for the regulation of ICOs, cryptocurrencies, cryptocurrency exchanges and other intermediary services related to cryptocurrencies.
The VFAA has provided a legislative framework for the management and licensing of ICOs, the drafting of the white paper and all the requirements that need to be met, for there to be a valid white paper. In Malta, the term ICO is now defined as an Initial Virtual Financial Asset Offering.
The VFAA specifically states that an issuer cannot offer a Virtual Financial Asset (VFA) to the public in or from within Malta or apply for a VFA’s admission to trading on a DLT exchange unless such issuer draws up a whitepaper. This whitepaper must be dated, include all the prerequisites found in the First Schedule of the VFAA and provide a statement by the board of administration, confirming that the whitepaper complies with the requirements in the Act.
Furthermore, a whitepaper shall be issued or published only if ten working days before the date of its circulation in any way whatsoever, a copy thereof, has been delivered to the MFSA. Before this copy is delivered it must be signed by every person who is a member of the issuer’s board of administration and by the VFA agent who confirms that the whitepaper is in compliance with the Act.
Any form of advertisement related to an initial VFA offering (ICO) will have to comply with certain requirements which are provided for in the VFAA and regulations to be issued thereunder to safeguard investor protection.
An issuer of an initial VFA offering (ICO) must appoint on an on-going basis a VFA agent who will ensure that the initial VFA offering (ICO) has satisfied all the requirements prescribed in the VFAA and any regulations or rules that will be published in the coming months. Furthermore, amongst other functions, the VFA agent must also advise and guide the issuer as to its responsibilities and obligations to ensure compliance with the Act, submit any information or documentation required by the MFSA and act as liaison between the issuer and the MFSA on all matters arising in connection with the registration of the whitepaper.
The whitepaper shall be drafted in English and it will remain valid for other by the public for six months after approval by the MFSA. The MFSA will only register the whitepaper if it has satisfied all the requirements mentioned in the VFAA.
The whitepaper shall include a summary which must be written in brief, non-technical language and provide key information in relation to the offering. The format and content of the summary shall provide appropriate information about essential elements of the VFA concerned in order to aid investors when considering whether to invest in such VFA.
The First Schedule of the VFAA contains a detailed list of what should be mentioned in the whitepaper. To name just a few, the white paper should contain:
Detailed technical description of the protocol, platform and, or application, as the case may be, and the associated benefits;
Detailed description of the characteristics and functionality of the VFA being offered;
Detailed description of the issuer, VFA agent, development team, advisors and any other service providers that may be deployed for the realization of the project;
Detailed description of the issuer’s wallet/s used;
Exchange rate of the virtual financial assets;
The total number of VFAs to be issued and their features; and
Methods of payment
EMD is in a position to advise and assist ICO operators with the company set up and documentation required to launch an ICO together with providing advice and assistance on the applicable regulatory regime.