ICO & Crypto Regulation in Malta

Blockchain Services > The Crypto Regulation

Malta was successful in becoming a Blockchain Island when its parliament passed the following bills unanimously:

• Innovative Technological Arrangement and Services Act
• Malta Digital Innovation Authority Act
• Virtual Financial Asset Act

The Innovative Technology Arrangements and Services Act (the ITAS Act)

The ITAS Act has also made provisions on ways to certify and audit architectures and software that has been utilised in the design and delivery of DLT, token exchanges, smart contracts, as wells as the decentralised autonomous entities. It can also check other innovative technologies as may be found fit by the minister after getting a recommendation from the Authority. The Act has deliberately used broad definitions to make this legislation adaptive to future innovations.

The Virtual Financial Assets Act (also called the VFAA)

Malta Has a Technology First Outlook When Formulation the ICO Regulation

Unlike many jurisdictions that just approve the whitepapers based on use case and other tokenomic assumptions, Malta looks as technology and software behind the white paper and its strong potential for implementation.

A Strong Focus On Technology

Malta is the first in the world to go into details when regulating the blockchain technologies. According to the Malta Parliamentary committee on Financial services, when the technology used is flawed, it cannot deliver what it states on the whitepaper. Therefore, the committee looks at technologies that Blockchain companies are using and not just the whitepaper.

Here is how Malta’s ICO crypto regulation is different from others. It takes a technology first approach when evaluating technologies whose providers submit the whitepaper. Its financial authority, the MFSA, then uses a technologically competent body, the MDIA, to determine if the crypto-business qualifies for licensing.

Many countries consider cryptocurrencies as assets or forms of investment but not legal tender or currencies. However, The Virtual Financial Assets Act has the Maltese Financial Instruments Test, which is used to determine the category of the DLT asset. Any company that would like to issue DLT assets in Malta or use Malta as the base to issue such assets overseas must take the Test. According to the Test, all tokens and cryptocurrencies are considered as DLT assets.

The passage of the bill effective makes Malta the first jurisdiction to provide some form of legal certainty in the blockchain space. Certainty is required by the serious operators to operate effectively. This assures the operators that the government would not draft a regulation that tells them that they are not within the law. These laws change this uncertainty.

The Commitment To A Safe & Competitive Crypto Jurisdiction

These three bills have cemented the government’s desire to create laws that guide cryptocurrency organisations and their operations based on principles of consumer and industry protection, as well as market integrity. These are the first laws around the world that offer comprehensive coverage of the ICOs, cryptocurrencies and the way assets offered to the investors are treated. They also cover service providers and their blockchain services, as well as the set up of a blockchain exchange. Today, Malta boasts of the world’s most robust framework that monitors and regulates the country’s ever-growing crypto-currency sector in a way that spurs innovation.

Malta has built on its experience as an innovator in the gaming and financial services sectors and positioned itself world-over as able to meet the crypto-challenge by providing a comprehensive framework that is the first world over. Speaking after the passage of the three acts of parliament, Malta’s Prime Minister, Joseph Muscat, said that he thought the innovation is currently happening in the DLT, blockchain technology and cryptocurrency sectors. He added that he was glad that Malta was the first country in the world to offer jurisdiction on regulating the sector. He finalised to say that the country is excited about the developments it would bring in future.

A Future Outlook To Boost Innovation

With the passage of these bills, Malta leads all the countries that are striving to become crypto-currency hubs such as Switzerland (where Zug has already been branded as Crypto-Valley) HongKong, Singapore, Estonia, Isle of Man, Lithuania, Bermuda and Liechtenstein. These countries fall back because they view the crypto-economy from the old financial paradigms’ vantage point. To them, the short-term financial gains from the sector are more important than the usage of smart software that gives strength and guarantees security to underling crypto-technology and all other tokenomic ecosystems built around it. In fact, these new crypto-laws not only work with cryptocurrencies, exchanges and the ICOs but are also applied to other blockchain technologies that may not be considered financial systems due to their nature.

This has provided a robust regulatory platform where Malta can guarantee the safety of the investors and consumers, as well as allowing for transparency. The strong technical approach on ICO crypto regulation offers the country some legal flexibility that is based on principle. This approach will aid in tailoring effective laws as the technology evolves.

All the regulatory entities, as well as the laws that come with the passage of the three crypto-laws, give some form of legal certainty. Therefore, it is expected that many new crypto-projects will set base in Malta thereby, energising the already flourishing crypto sector. Moreover, the clarity of the laws has pulled the biggest players in this sector to launch projects from Malta.

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