Consultation Paper on the Virtual Financial Assets Regulations in Malta

The MFSA issued a consultation paper entitled ‘Consultation with the Financial Services Industry with regards to the Virtual Financial Assets Regulations to be issued under the Virtual Financial Assets Act’ found here.

The draft legal notice sets out the Virtual Financial Assets Regulations (Regulations) which will be issued under the Virtual Financial Assets Act (VFAA), particularly on exemptions, fees, control of assets; and administrative penalties and appeals, with the aim of safeguarding financial stability, promoting market integrity and ensuring investor protection.

Exemptions

The consultation paper provides an exhaustive list of fourteen different persons who are exempt from acquiring a license for VFA services in terms of licensing requirements in Article 13 listed under the VFAA. Some of these include, but are not limited to:

  • The MFSA and any person appointed for the purpose of its regulatory and supervisory functions;
  • A liquidator or a curator in bankruptcy;
  • Persons which provide Virtual Financial Asset (VFA) services exclusively for their parent companies, for their subsidiaries or for other subsidiaries of their parent undertakings; (the person applying an exemption in this scenario shall notify the MFSA prior to the application of such an exemption)

Advertisements which normally need to be vetted by the license holder’s board of administration under Article 29 of the VFAA, do not need such approval under this draft legal notice, where such advertisements are issued by the Government of Malta or the Central Bank or any international organisation, the members of which, include Malta.

Fees

The proposed Regulation provides for the application and annual supervisory fees, license classification fees, made up of four different categories and fees for VFA agents. For anyone issuing a initial VFA offering (ICO) any person shall, upon submission of a whitepaper for registration or for an application for the granting of a registration, a licence or any other kind of authorisation, irrespective of whether the whitepaper is registered or whether the application is eventually accepted or not, pay to the MFSA €4,000 for the application fee and €1,000 upon the submission of the certificate of compliance for the annual supervisory fee.

Control of Assets

The Regulations state that a subject person (who is in possession of a license or is exempt) having the control of assets belonging to a customer in the course of rendering a VFA service to such customer, shall hold such assets solely for and on behalf of and in the interest of, the customer. This is done in order to provide protection for investors, so that anyone in possession of a licence or exempt would be subject to additional requirements when holding and/or controlling clients’ monies and/or assets.

Administrative Penalties and Appeals

The proposed Regulations establishes that if a person fails to comply with any provisions within these Regulations or any rules issued thereunder, then the MFSA may, by notice in writing and without recourse to a court hearing, impose on such person an administrative penalty and other administrative measures in accordance with the VFAA. Under the VFAA the administrative penalty the MFSA may impose, may not exceed one hundred and fifty thousand euro (€150,000) for each infringement or failure to comply as the case may be. A right of appeal to the Financial Services Tribunal shall lie from the decisions which the MFSA will take.

The consultation is open to the public from 4 July 2018 and interested parties are requested to submit their comments and feedback by email on fintech@mfsa.com.mt by not later than 20 July 2018.