Slow down before flocking to ‘blockchain island’, says MFSA

Authority says virtual currency framework not yet in force and cannot yet entertain requests for approvals and authorisations

The Malta Financial Services Authority has advised would-be “blockchain island” residents to slow down before applying for ‘citizenship’ because the framework governing the area has not yet been brought into force.

In a statement issued on Friday, the Malta Financial Services Authority said that it was still developing the framework underlying recently passed blockchain laws. The MFSA said operators should wait for a public announcement from the authority before sending in requests for approvals and authorisations.

Parliament passed the Virtual Financial Assets Act earlier this month, on 4 July – one of three bills introducing regulation for the blockchain sector.

But while the Act was published on the Laws of Malta website on Friday, the MFSA said, “Notwithstanding that the Act has been published, it is not yet in force and will take effect on such date as the Minister for Digital Economy may establish by notice in the Government Gazette.”

The MFSA said it is currently devising the Virtual Financial Assets Framework underlying and complementing the Act. In this regard, on 4 July 2018 the MFSA published “Consultation Paper on the Virtual Financial Assets Regulations to be issued under the Virtual Financial Services Act” by presenting a draft Legal Notice setting out regulations on: [i] exemptions; [ii] fees; [iii] control of assets; and [iv] administrative penalties and appeals (‘the Regulations’).

The period for consultation closed on Friday.

On 12 July, the MFSA published “Consultation Paper on the Virtual Financial Assets Rules for VFA Agents” presenting Chapter 1 of the proposed Virtual Financial Assets Rulebook (‘the Rulebook’).

This chapter sets out the: [i] high level principles which VFA Agents must adhere to; [ii] registration requirement and the respective registration process; [iii] on-going obligations for the VFA Agents; and [iv] enforcement and sanctions in the event of misconduct by VFA Agents. The period for this consultation closes on 31 July. Further to the latter, the MFSA will be issuing Chapter 2 of the Rulebook (Virtual Financial Assets Rules for Issuers of Virtual Financial Assets) and Chapter 3 of the Rulebook (Virtual Financial Assets Rules for VFA Service Providers) for consultation in the coming weeks.

The final Regulations and Rulebook underlying the Act will be issued following consideration of the feedback received to the above-mentioned consultations.

However, the MFSA highlighted “that the Framework is, in the meantime, not yet in force.

“Therefore, the MFSA will be in a position to start receiving requests for approvals and authorisations under the Act once the Framework is operational. Updates and developments in this regard will be made public on the Virtual Financial Assets Framework’s page on the MFSA website.”