INTRODUCTION

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, the MFSA drafted and submitted to the Government the Virtual Financial Assets Act ('the Act'). The Act will come into force on such date as the Minister for Digital Economy may establish by notice in the Gazette.

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: [i] exemptions; [ii] fees; [iii] control of assets; and [iv] administrative penalties and appeals ('the Virtual Financial Assets Regulations'). This consultation closes on 20 July 2018.

The Authority is now preparing the rules underlying and complementing the Act and the Virtual Financial Assets Regulations. The Rules will provide further detailed regulation applicable to operators in this field of financial services. The MFSA is proposing the introduction of a rulebook, titled the 'Virtual Financial Assets Rulebook', which will be subdivided into three chapters as follows:

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 scope of this Consultation is to obtain industry feedback in relation to Chapter 1 of the Virtual Financial Assets Rulebook, which is annexed to this paper.

The proposed Chapters 2 and 3 of the Virtual Financial Assets Rulebook will be issued for consultation in the coming weeks.

CHAPTER 1 | VIRTUAL FINANCIAL ASSETS RULES FOR VFA AGENTS

Chapter 1 of the Virtual Financial Assets Rulebook shall apply to VFA Agents appointed in terms of the Act and applicants seeking registration as VFA Agents thereunder. It is being proposed that this Chapter is sub-divided into four titles which respectively set out: [i] the high level principles which VFA Agents must adhere to; [ii] the registration requirement and the respective registration process; [iii] the ongoing obligations for the VFA Agents; and [iv] enforcement and sanctions in the event of misconduct by VFA Agents.

  1. High level Principles

    Title 1 requires VFA agents to act ethically, honestly, fairly and professionally, to cooperate fully with the competent authority and to provide it with any information it may require. VFA Agents are also required to make reference, and where applicable comply with, relevant laws, rules and regulations.

  2. Registration Requirement and the respective Registration Process

    Title 2 identifies the registration requirements for applicants wishing to be registered as VFA Agents under Article 7 or/and 14 of the Act, and the applicable registration process. The registration process consists of three phases – the preparatory phase, the pre-registration phase and the post-registration/ pre-commencement of business phase. The procedures for voluntary suspension, voluntary surrender, and revision of registration and the approval process for designated and appointed persons are also set out under this title.

  3. On-going Obligations

    The on-ongoing obligations for VFA Agents are set out in Title 3 of this Chapter. These inter alia include, requirements in relation to insurance coverage, governance, outsourcing, procedures for reporting of breaches, obligations with respect to the on-boarding of clients, conduct of business obligations, the procedure to be followed where more than one VFA Agent is appointed and notification and approval requirements. Title 3 also sets out supplementary conditions for VFA Agents appointed in terms of Article 7 of the Act and supplementary conditions for VFA Agents appointed in terms of Article 14 of the Act, respectively.

  4. Enforcement and Sanctions

    Title 4 provides detail with regards to administrative penalties and sanctions. It inter alia provides the principles which guide the MFSA when imposing an administrative penalty and provides for aggravating and mitigating circumstances.

CONCLUDING REMARKS

The consultation is open to the public from 12 July 2018 until the 31 July 2018. Interested parties are requested to submit their comments and feedback by email on fintech@mfsa.com.mt by not later than 31 July 2018.

To view the full article, please click here

Originally published in MFSA

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.