Malta Financial Services Authority issues consultation document on Virtual Financial Assets

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The Malta Financial Services Authority (the “MFSA”) has issued a consultation document on The Virtual Financial Assets (“VFAs”) Regulations to be issued under the Virtual Financial Services Act (the “Regulations”).

The document which was seen by CCN aims at providing further clarity on the issue of Virtual Financial Assets and how these will begin to operate as well as the fees involved in the registration process. According to sources in the industry, a rule book is also expected to be published within the next 3-6 weeks.

The Legal Notice describes the different classes of licences and divides these into four types of Virtual Financial Assets Act classes (“VFAA”). These are licence holders authorised in:

VFAA Class 1 Receiving and transmitting orders of VFAs; and/or Providing investment advice with respect to VFAs; and/or Placing VFAs.

VFAA Class 2 Providing any VFA service and holding or controlling clients’ money, excluding the operating of a VFA exchange or dealing for their own account.

VFAA Class 3 Providing any VFA service and holding or controlling client’s money, excluding the operating of a VFA exchange.

VFAA Class 4 Operating a VFA exchange; Holding or controlling client’s money, VFAs and/or private cryptographic keys; Custodian or nominee services solely in relation to the operation and activities of such VFA exchange.

The consultation document is accompanied by a Legal Notice which provides further information with respect to:

Exemptions from licensing and the advertisement requirements under the Virtual Financial Assets Act. The Legal Notice contains an exhaustive list of persons who will not be required to obtain a VFA Services licence. It is being proposed that some exemptions will apply automatically, while others require a notification to or a determination in writing by the MFSA.

Fees applicable for licence applications, whitepaper reviews and annual supervision by the MFSA Fees will vary according to the different classes of licences and the particular VFA Agents to whom these may apply. The fee applicable for the registration of a whitepaper will be €4,000 and the applicable annual supervisory fee will be €1,000 upon the submission of a certificate of compliance. The fee applicable for the registration of a VFA Agent will range between €5,000-€7,500 depending on the particular appointment. VFAA Licence fees will range between €3,000-€12,000 depending on the particular VFAA licence class. The Legal Notice also prescribes annual supervisory fees which shall be due immediately once an authorisation is granted. Supervisory fees will range between €2,750 and €25,000.

Control of Assets: It is proposed that VFA Services licence holders, VFA Agents and exempted persons who hold and/or control clients’ funds and/or assets will be made subject to further obligations under the Regulations. Administrative Penalties and Appeals. The Legal Notice proposes granting the MFSA the power to, by written notice and without recourse to a court hearing, impose an administrative penalty or other administrative measure upon subject persons who breach the provisions of the Regulations. The Legal Notice further envisages a right of appeal to the Financial Services Tribunal.

The MFSA has stated that it is seeking feedback from the financial services industry and other interested stakeholders with regards to the proposed regulations.