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Virtual Financial Asset Services in Malta: Everything You Need to Know

If you are a blockchain-powered business looking for a reputable jurisdiction with a stable legal climate and technology-friendly regulatory regime – chances are you might want to consider Malta, which has adopted one of the most detailed DLT frameworks, aiming to become a world innovation hub.

However, since it might not be as easy to navigate, our local legal partners at Blockchain Advisory Limited have kindly agreed to share a detailed guide about types of Virtual Financial Asset Services, available on the “Blockchain Island”.

VFA Framework

VFA Services in Malta are regulated under the Virtual Financial Assets Act, Chapter, 1590 of the Laws of Malta (the “Act”) which came into force in November of 2018. The Act is part of the Maltese Virtual Financial Assets Regulatory Framework and the National Blockchain Strategy launched by the Maltese Government in April of 2017. The Act was the very first of its kind across the globe and was meant to provide a robust regulatory framework governing the issue of virtual financial assets and the provision of services related to virtual financial assets in or from within Malta.

The Maltese VFA Framework is principle-based rather than rules-based, and it offers a very attractive regime not only for licensees but also for investors. To this effect, any person providing or holding himself out as providing a VFA Service in or from within Malta must possess a valid VFA Services licence issued by the Malta Financial Services Authority (the “MFSA”).

Licensable Activities

VFA Service is defined as any service falling within the Second Schedule of the Act when provided in relation to a DLT Asset which has been determined to be a virtual financial asset. The following constitutes an exhaustive list of licensable services and activities in terms of the Act:

       1. Reception and Transmission of Orders

The reception from a person of an order to buy, sell or subscribe for virtual financial assets and the transmission of that order to a third party for execution.

       2. Execution of orders on behalf of other persons

Acting to conclude agreements to buy, sell or subscribe for one or more virtual financial assets on behalf of other persons.

       3. Dealing on own account

Trading against proprietary capital resulting in the conclusion of transactions in one or more virtual financial assets.

       4. Portfolio Management

Managing or agreeing to manage assets belonging to another person if those assets consist of or include one or more virtual financial assets or the arrangements for their management are such that the person managing or agreeing to manage those assets has the discretion to invest any of those assets in one or more virtual financial assets: the term “assets” shall exclude any financial instrument, and whether or not issued in Malta.

     , 15. Custodian or Nominee Services

  1. Acting as custodian or nominee holder of a virtual financial asset and, or private cryptographic key; or
  2. holding a virtual financial asset and, or private cryptographic key as a nominee, where the person acting as nominee is so doing on behalf of another person who is providing any VFA service or on behalf of a client of such person, and such nominee holding is carried out in relation to such service.

      6. Investment Advice

Giving, offering or agreeing to give, to persons in their capacity as investors or potential investors or as agent for an investor or potential investor, a personal recommendation in respect of one or more transactions relating to one or more virtual financial assets.

      7. Placing of virtual financial assets

The marketing of newly-issued virtual financial assets or virtual financial assets which are already in issue but not admitted to trading on a DLT exchange, to specified persons and which does not involve an offer to the public or existing holders of the issuer’s virtual financial assets.

      8. The operation of a VFA exchange.

 

Licence Categories

VFA Services licences are divided into four main categories. The following table sets out the relevant capital requirements for the different categories of VFA Services licences:

Licence Class

Authorised Activities

Minimum Initial Share Capital

Application Fee

Annual Supervisory Fee

Class 1

Authorised to receive and transmit orders and/ or provide investment advice in relation to one or more virtual financial assets and/ or the placing of virtual financial assets. Class 1 licensees are not authorised to hold or control clients’ assets or money.

€50,000; or €25,000 plus PII

€6,000

For revenue up to €50,000

€5,500

Further tranches of €50,000 up to a maximum of €1,000,000

€700 per tranche or part thereof

Class 2

Authorised to provide any VFA service but not to operate a VFA exchange or deal for their own account. Class 2 licensees may hold or control clients’ assets or money in conjunction with the provision of a VFA Service.

€125,000

€10,000

For revenue up to €250,000

€9,000

Further tranches of €250,000 up to a maximum of €5,000,000

€800 per tranche or part thereof

Class 3

Authorised to provide any VFA service but not to operate a VFA exchange. Class 3 licensees may hold or control clients’ assets or money in conjunction with the provision of a VFA Service.

€730,000

€14,000

For revenue up to €250,000

€12,000

Further tranches of €250,000 up to a maximum of €5,000,000

€800 per tranche or part thereof

Class 4

Authorised to provide any VFA service. Class 4 licensees may hold or control clients’ assets or money in conjunction with the provision of a VFA Service.

€730,000

€24,000

For revenue up to €1,000,000

€5,000

Further tranches of €1,000,000 up to a maximum of €100,000,000

€5,000 per tranche or part thereof

 

If you are looking to receive a DLT license or any other service in Malta, we would be delighted to help you.

Once again, Legal Nodes is very grateful to Blockchain Advisory for agreeing to share this highly relevant regulatory information with our readers, helping them stay compliant in Malta.

Disclaimer: the information in this article is provided for informational purposes only. You should not construe any such information as legal, tax, investment, trading, financial, or other advice.

Blockchain Advisory Limited Team

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