MFSA Announces Upcoming Alignment of Malta’s VFA Framework with the Regulation of Markets in Crypto Assets

On the 23rd December 2020, the Malta Financial Services Authority (MFSA) issued the second Volume of the MFSA’s publication “The Nature and Art of Financial Supervision” (Publication), a Publication which focuses on the supervision of Malta’s Virtual Financial Assets (VFA) sector and provides an overview of the local VFA Framework and how it is being implemented, highlighting the MFSA’s main observations over 2020 and setting out the MFSA’s expectations.

The Publication refers to the upcoming adoption of the EU’s Digital Finance Package, and critically, also refers to the upcoming EU legislative proposals on the Regulation of Markets in Crypto Assets (MiCA). In this regard, it should be observed that a critical announcement has been made by the MFSA within the Publication, namely that the MFSA will continue to monitor MiCA developments to ensure that Malta’s VFA Framework can evolve in a “seamless manner into the new Regulation once this comes into force”.

In light of the above, an upcoming legislative amendment of the local VFA Framework can be expected, one which is intended to align the Virtual Financial Assets Act (Cap 590 of the Laws of Malta) and related legislation with MiCA.

In practice, such legislative endeavour appears to be unavoidable, given that MiCA was proposed as an EU Regulation which is clearly meant to achieve legislative harmonization across all EU states on crypto-assets’ regulation.

The MFSA announced that the changes which will be made will ensure to promote innovation while ensuring that the local VFA Framework remains robust and continues to effectively achieve the principle objectives of financial services regulation. Consultation with industry participants and interested parties on the way forward was also announced, together with a terse gap analysis between MiCA and the local VFA Framework as at today.

The second Volume of the MFSA’s publication “The Nature and Art of Financial Supervision” can be accessed here .

If you are interested to read further about MiCA, you may wish to read our previous articles “A quick glance at the European Union Proposal for Regulation on Markets in Crypto-assets (MiCA )”, “Proposal of the EU Regulation on Markets in Crypto-Assets Now Officially Released: The End of National Crypto-Asset Legal Regimes within the EU seems Near” and “The Chimera of Legal Certainty under the proposed Regulation on Markets in Crypto-Assets (MiCA)”.

Article written by Senior Associate Dr Terence Cassar.

For more information on Fintech, Blockchain and Crypto-assets, please contact Dr Ian Gauci and Dr Terence Cassar.

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