In pursuance of the power granted by the Virtual Financial Assets Act (the ‘VFAA’) to make regulations to give effect to the provisions of the VFAA, the Malta Financial Services Authority (the ‘MFSA’) has published a consultation paper which includes the draft Virtual Financial Asset regulations to be issued under the VFAA (the ‘Regulations’).

Whilst the VFAA seeks to offer high level principles with the aim of regulating the field of Initial Virtual Financial Asset Offerings and Virtual Financial Assets, the proposed Regulations seek to provide more detailed regulation, particularly with respect to exemptions; fees; control of assets; and administrative penalties and appeals. Each will be discussed in further detail below.

With regards to exemptions, the Regulations set out an exhaustive list of persons who will be exempt from the requirement to obtain a VFA services licence in terms of the VFAA. The list of exempt persons includes, but is not limited to, a liquidator or a curator in bankruptcy acting in the course of the liquidation or bankruptcy; persons dealing on own account in terms of the VFAA or acting exclusively for their parent companies, or their subsidiaries; and securitisation SPVs.

In connection with fees, the Schedule to the proposed Regulations provides for application and supervisory fees for four different classes of licences as well as fees for VFA Agents. By way of example, the application fee for the registration of a white paper has been set at €4,000 with a further €1,000 supervisory fee which will be charged upon the submission of the certificate of compliance.

In respect of control of assets, in order to enhance investor protection, the proposed Regulations set out additional requirements for persons in possession of a licence under the VFAA or acting under an exemption from the requirement of such a licence, as discussed above, when such persons are holding and/or controlling clients’ monies and/or assets. Such requirements include, for example, the obligation on subject persons not to use virtual financial assets which they hold on behalf of a customer, for their own account.

Finally, the proposed Regulations provide that the MFSA may, by notice in writing and without recourse to a court hearing, impose an administrative penalty and other administrative measures on a person in breach of the Regulations. In this connection, a right of appeal to the Financial Services Tribunal is available to such persons.

While we will be happy to discuss any issues you may have, the consultation is open to the public until 20 July 2018 and interested parties can submit their comments and feedback with respect to the proposed Regulations by email on fintech@mfsa.com.mt by not later than 20 July 2018.

The consultation paper can be found here.