Malta to remove NFTs from digital asset regulation in anticipation of MiCA

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Malta’s Financial Services Authority indicated on Monday that it wants to remove non-fungible tokens (NFTs) from its Virtual Financial Asset (VFA) regulation in preparation for the European Union’s upcoming Markets in Crypto-assets Regulation (MiCA).

Under the current VFA regime, which was set up in 2018 to regulate digital asset initial coin offerings (ICOs), NFTs are subject to specific requirements upon launching and must also issue a product whitepaper before the issuance.

This relatively stringent framework goes further than the EU’s MiCA, which will come into force in Malta and across the bloc in spring 2025.

In a consultation document released by the Malta Financial Services Authority (MFSA), the organization cited the upcoming EU regulation as a reason for the move, stating MiCA will “exclude crypto-assets which are unique and not fungible with other crypto-assets from its scope, eliminating the need for any form of authorization when engaging in issuance or provision of services in relation to NFTs.”

The MFSA also suggested that the uniqueness and lack of interchangeability of NFTs limit the extent to which they can be used for investment or payment purposes. Therefore, their inclusion within the VFA framework “may run counter to the spirit of the Act,” which was originally intended to regulate investment-type services.

Malta was one of the first EU states to set up its own digital asset registration regime back in 2018, which it introduced alongside the Malta Digital Innovation Authority (MDIA), an organization aimed at promoting Malta as “the center for excellence for technological innovation.”

The country’s decision to exclude NFTs from the VFA framework is not final, and the MFSA concluded its ‘consultation’ letter by inviting feedback from stakeholders up to January 6, 2023, after which it will make its final decision.

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