Transfer of Virtual Financial Assets Becomes a Licensable Service in Malta

On the 16th March 2021, the Minister responsible for the regulation of financial services passed Legal Notice 106 of 2021, ‘the Virtual Financial Assets Act (Amendment) Regulations 2021’ (the ‘Legal Notice’) which amends the Virtual Financial Assets Act (Cap 590 of the Laws of Malta, the ’VFA Act’).

The Legal Notice was issued to clarify the definition of “VFA exchange” under the VFA Act and, more critically, to add a new service, ‘the Transfer of Virtual Financial Assets’, to the list of licensable VFA services under the VFA Act.

Prior to the amendments, “VFA exchange” was defined as “a DLT exchange operating in or from within Malta, on which only virtual financial assets may be transacted in accordance with the rules of the platform or facility, which is licensed by the competent authority under this Act to provide such services;” Following the amendment, the definition of “VFA exchange” will be changed to read as follows: “a  DLT  exchange  for  virtual financial assets, operating in or from within Malta, within which multiple  third  party  buying  and selling  interests  for  virtual financial assets can interact in a manner that results in a contract, by exchanging one virtual financial asset for another or a virtual financial  asset  for  fiat  currency  that  is  legal  tender  or  a  fiat currency that is legal tender for a virtual financial asset;”.

The second amendment is the addition of ‘Transfer of Virtual Financial Assets’ to the list of licensable VFA services in the second schedule of the VFA Act, namely  ‘Conducting a transaction on behalf of a third party that moves a virtual financial asset from one virtual financial asset address or account to another’.

It appears that the Legal Notice’s addition of the VFA service ‘Transfer of Virtual Financial Assets’ was made to bring the services considered as licensable VFA Services under the VFA Act, close to the services requiring AML/CFT requirements as per the Financial Action Task Force (‘FATF’) recommendations.

News update written by Senior Associate Dr Terence Cassar and Junior Associate Dr Gigi Gatt.

For further information on FinTech, Blockchain and Virtual Financial 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.