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Malta consults on revised digital asset rules to align with MiCA

The Malta Financial Services Authority (MFSA) has launched a public consultation on proposed changes to its digital asset regulations to align them with the European Union’s Markets in Crypto-Assets (MiCA) regulations, which was signed into law in May and will come into force in 2024.

“In order to ensure a smooth transition for Virtual Financial Assets (‘VFA’) Service Providers, the Authority is taking steps to align the VFA Framework to the MiCAR prior to its date of application,” the MFSA said.

Malta was one of the first countries to regulate the digital asset industry, establishing a comprehensive regulatory framework for digital assets called the Virtual Financial Assets Act (VFAA), which came into effect on November 1, 2018.

The VFA Act included definitions for virtual financial assets; a licensing regime placing digital assets under MFSA’s regulatory authority; a requirement for token issuers to prepare and submit a white paper; provisions to prevent market abuse; rules for conducting ICOs; regulatory standards for exchanges and trading platforms; and AML and CTF obligations.

The revised VFA rulebook doesn’t throw everything out, but proposes changes to bring the digital asset rules in line with MiCA. Some of the key changes are:

  • The MFSA has removed the systems audit requirement for VFA license holders.
  • The capital requirements for Class 3 and 4 license holders were reduced to $133,000 (125,000 euros) and $159,000 (150,000 euros), respectively. In Malta’s VFA regime, Class 3 licenses are for entities providing custody and administration of VFAs; Class 4 licenses pertain to trustees managing collective investment schemes investing in VFAs.
  • The professional indemnity insurance requirement was removed.
  • The outsourcing requirements were updated in line with MiCA.
  • The requirement to draw up an orderly wind-down plan has been introduced.
  • The requirement for a Risk Management and the Internal Capital Adequacy Assessment Report has been removed.

After MiCA was passed by the EU parliament, Malta, like all 27 EU nations, could either wait 18 months for the new laws to come into effect or amend existing regulations to ensure a smooth transition. As one of the more pro-active EU nations when it comes to digital asset regulation, it’s no surprise Malta has chosen the latter option.

Stakeholders were invited to consult on the draft version of the Rulebook and provide feedback to answer if they agree with the proposed changes and transitionary measures and if they see other areas of alignment.

The MFSA stated that any respondent must submit their queries or comments by September 29.

Watch: Malta Gaming Authority talks blockchain regulation in the gambling space

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