Virtual Financial Assets (VFA) Guidelines Need Fine-Tuning According to Stakeholders

Virtual Financial Assets (VFA) Rulebook

The MFSA drafted and submitted to the Government the Virtual Financial Assets Act that will come into force on a date that may be established by notice in the Gazette by the Minister for Digital Economy, following the positive feedback received on the proposed introduction of a new legislative framework regulating Initial Coin Offerings (‘ICOs’) and the provision of certain services in relation to virtual currencies.

On 4 July 2018, the MFSA published a “Consultation Paper on the Virtual Financial Assets Regulations to be issued under the Virtual Financial Assets Act which presents a draft Legal Notice setting out regulations on:

  1. Exemptions
  2. Fees
  3. Control of assets
  4. Administrative penalties and appeals

This consultation closed on 20 July 2018.

As presented in the Consultation Paper on the Virtual Financial Assets Rules for VFA Agents which was published on 12 July 2018, the MFSA proposed the introduction of a rulebook, titled the ‘Virtual Financial Assets Rulebook’, which will be subdivided into three chapters:

Chapter 1: Virtual Financial Assets Rules for VFA Agents
Chapter 2: Virtual Financial Assets Rules for Issuers of Virtual Financial Assets
Chapter 3: Virtual Financial Assets Rules for VFA Service Providers

The reactions

The Malta Financial Services Authority (MFSA) has now presented a Virtual Financial Assets (VFA) rulebook regarding chapter 2. This rulebook has not been warmly accepted by financial service providers who spoke to CCN. Some have complained that the rulebook is unnecessarily cautious making business slightly more complex where crypto currencies and Blockchain are concerned.

Joseph Borg, Partner at WH Partners spoke to CCN saying that the publication of the rulebook was indeed a positive step but needed to be polished so as to be deemed truly effective. He suggested for stakeholders to participate in the consultation to assist MFSA devise a vigorous and attractive well-balanced regulatory framework.

Dr. Simon Schembri, Partner at Ganado Advocates Corporate Department also spoke to CCN on the rulebook and was more wary in his comments saying

“There are some issues which merit further discussion with the regulator, and as interested parties in this space, we have already provided our feedback for relative amendments and clarifications within the time frame of the conclusion of the first consultation period relative to the first chapter. We are currently reviewing the second consultation paper relative to the second chapter, issued just two days ago and we will provide with our feedback to the regulator in due course.”

The consultation for Chapter 1 of the Virtual Financial Assets Rulebook closed on 31 July 2018 whilst the consultation for the others closes on 13 August 2018.

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