Malta set itself at the forefront of innovation in the blockchain or ‘DLT’ industry through its promulgation of three distinct Acts regulating the sector in November 2018. Through this robust framework, Malta is one of the few jurisdictions around the world which provides legal certainty for service providers and investors alike.
‘DLT’ or Distributed Ledger Technology is defined as “a database system in which information is recorded, consensually shared, and synchronised across a network of multiple nodes” in the Virtual Financial Services Act (VFAA). This act also provides the definition of a ‘DLT asset’ as “a virtual token, a virtual financial asset, electronic money or a financial instrument that is intrinsically dependent on, or utilises, Distributed Ledger Technology”.
The Virtual Financial Assets Act (VFAA) regulates Virtual Financial Assets (VFAs), which are defined as “any form of digital medium recordation that is used as a digital medium of exchange, unit of account, or store of value and that is not an electronic money, a financial instrument, or a Virtual Token”.
The Innovative Technology Arrangements and Services Act (ITAS) regulates the registration of Technology Service Providers and the certification for technology arrangements. Technology arrangements include software used to design and deliver DLT which uses a distributed/decentralized ledger, smart contracts and related applications.
The Malta Digital Innovation Authority (MDIA) Act establishes the MDIA, an authority aimed at the promotion and development of innovative technology in Malta through regulating innovative technology arrangements and services. Some of the principal aims of the MDIA include promoting governmental policies in the sector, promoting the utilisation of innovative technologies, and to protect the general public from abuse in the sector.
Another regulatory authority which is heavily involved in the DLT industry is the Malta Financial Services Authority (MFSA), which is responsible for licensing and supervising DLT service providers. The comprehensive framework also regulates ICOs and exchanges, which were coined as Initial Virtual Financial Asset Offering (IVFAO) and VFA exchanges in the VFAA which are also regulated by the MFSA.
A security token offering is the offering of transferable securities which have been tokenized on a distributed ledger technology platform.
Malta is the first jurisdiction to introduce a complete regulatory framework for the DLT & crypto industry.
The growth of Malta’s capital markets and the Maltese financial sector make Malta a prime jurisdiction for corporate finance and capital growth.