On the 4th July 2018, the Maltese Parliament approved the three Bills relating to blockchain technology and effectively regulating blockchain-based businesses and their service providers, as well as cryptocurrencies and initial coin offerings, making Malta the first jurisdiction globally to enact specific and comprehensive legislation in the sector.
The Legislative Acts
The three Bills aim primarily to effectively substitute the current legislative gaps and legal vacuum with legal and regulatory certainty by creating a favourable and prudent regulatory environment for DLT
The three Bills, namely the Malta Digital Innovation Authority Act, the Innovative Technology Arrangements and Services Act, and the Virtual Financial Assets Act aim primarily to effectively substitute the current legislative gaps and legal vacuum with legal and regulatory certainty by creating a favourable and prudent regulatory environment for Distributed Ledger Technology (DLT) and related service providers.
The Malta Digital Innovation Authority Act – caters for the establishment of a new regulatory authority, the MDIA, specifically tasked with promoting and developing the innovative technology sector in Malta through proper and prudent regulation.
The Innovative Technology Arrangements and Services Act – This component legislative instrument establishes the legal framework governing the registration of Technology Service Providers and the certification of Technology Arrangements (including, inter alia, software and architectures which are used in designing and delivering DLT, smart contracts and related applications).
The Virtual Financial Assets Act – established a comprehensive framework governing ICOs and the operation crypto exchanges. This Act brings much needed clarity to the legal treatment of DLT assets and also creates specific requirements for the drafting of a whitepaper.
The MFSA Regulatory Consultation
From a regulatory perspective, the Malta Financial Services Authority (MFSA) has also published a consultation paper in respect of the draft Virtual Financial Asset regulations to be issued under the Virtual Financial Assets Act (VFAA) in accordance with its mandate pursuant to the powers granted by virtue of the said VFAA to make regulations to give effect to the Act.
The MFSA has also published a consultation paper in respect of the draft Virtual Financial Asset regulations … to flesh out the provisions of the VFAA and to provide more detailed regulation
Accordingly, whilst the VFAA effectively establish the high-level principles governing the sector of Initial Virtual Financial Asset Offerings and Virtual Financial Assets, the proposed MFSA Regulations seek to flesh out the provisions of the VFAA and to provide more detailed regulation, particularly insofar as considerations relative to exemptions, fees, control of assets and administrative penalties and appeals are concerned.
The MFSA consultation closes on the 20th July 2018, whereafter a feedback statement is expected to be issued in respect of the consultation process and corresponding conclusions.