As previously reported, the Malta Financial Services Authority (“MFSA”) published the finalized version of Chapter 3 of the Virtual Financial Assets Rulebook: Virtual Financial Assets Rules for VFA Services Providers (“Finalized Rulebook”) on the 25th February 2019. You can access the following for further information in this respect .

The Finalized Rulebook was issued by the MFSA following a public consultation which was launched in August 2018. At face value, it appears that no substantial changes were implemented to the draft version of the Rulebook as published at consultation stage (“Draft Rulebook”).

This article shall briefly examine the changes which were implemented by the MFSA upon publication of the Finalized Rulebook.

Dual Control Principle

Under the Draft Rulebook, License Holders had the possibility of derogating from the “dual control principle” by being allowed to operate without simultaneously having two persons managing the entity. The said derogation possibility has now been completely removed under the Finalized Rulebook.

Investment Advice

Under the Draft Rulebook, natural persons could have acquired a licence to offer investment advice in relation to virtual financial assets (“VFAs”). This option has not been kept in the Finalized Rulebook, which consequently means that every person intending on offering investment advice in VFAs must be a company or other form of legal person.

Functionaries Required to Complete MFSA Approved Course

Individuals occupying the function of a Compliance Officer and, or Money Laundering Reporting Officer of a License Holder are now in terms of the Finalized Rulebook obliged to complete a course approved by the MFSA.

A mandatary interview with the MFSA will also be necessary in order to be allowed to occupy such a position. MFSA interviews with beneficial owners and functionaries such as board of administration, senior manager and the risk manager are also a possibility.

Obligations on License Holders

A few additional obligations have been introduced upon License Holders. For instance, the obligations on Licence Holders offering portfolio management services have been augmented, in that they must now provide a suitability statement to their clients every quarter (in addition to the suitability statement furnished before providing the service).

It has also been clarified that the Board of Administration must ensure that there are in place adequate systems and controls from an information technology and cyber-security perspective.

Clarification on Supervisory Fees

The Finalized Rulebook also clarifies the rules on annual supervisory fees due by a License Holder, by outlining that in the first year following the acquisition of the Licence, the minimum supervisory fee payable shall be proportionate to the period remaining between the granting of the Licence and the due date of the annual audited financial statements.

Minimum Indemnity Limits

The Finalized Rulebook introduces minimum limits of indemnity obligations on License Holders. In this regard, License Holders must have in place an indemnity which, per claim, covers the higher of three times the relevant income (for all Classes) or €1,000,000 in the case of Class 1 License Holders. With respect to aggregate claims, an indemnity limit of the higher of three times the relevant income (for all Classes) or €1,500,000 for Class 1 licence holders applies.


In the case of listing of VFAs, the Draft Rulebook contained an obligation to ensure whether the VFA has been traded on sidechains. The said obligation has been removed under the Finalized Rulebook.

Anonymisation Features

The Finalized Rulebook clarifies that the obligation against onboarding of VFAs which have in-built anonymisation features applies to all License Holders, and not just VFA Exchanges. Additionally, the Finalized Rulebook clarifies that the transaction history of a VFA is to be taken into consideration in determining whether the VFA holder can be identified or otherwise.

MFSA Consent for Provision of Services Abroad

The Draft Rulebook imposed on License Holders an obligation to obtain consent from the MFSA prior to applying to regulators abroad for offering of their VFA services. This consent obligation has now been removed. MFSA notification and internal assessment requirements, including the obtainment of legal opinions, still apply.

Changes in Terminology

Cosmetic changes in applicable terminology were executed in the Finalized Rulebook. For example, the term “individual” was replaced with “person” whilst the term “VFA Service Provider” was replaced with “License Holder”. Similarly, the term “professional client” was replaced with “experienced investor” and “retail investor” was replaced with “non-experienced investor”. No substantive changes materialised from the said change in terminology.

Article by Dr Terence Cassar and Dr Bernice Saliba.

For more information on Fintech, Cryptocurrencies, ICOs, Blockchain and related areas please contact Dr Ian Gauci on, Dr Terence Cassar on and Dr Cherise Abela Grech on

Disclaimer: This article is not intended to impart legal advice and readers are asked to seek verification of statements made before acting on them.

Disclaimer This article is not intended to impart legal advice and readers are asked to seek verification of statements made before acting on them.
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