Financial Crime World

MALTA TAKES LEAD IN REGULATING CRYPTOCURRENCIES: AML/KYC REQUIREMENTS FOR VFA OPERATORS

Malta, a pioneer in cryptocurrency regulation, has made significant strides by introducing anti-money laundering and combating the financing of terrorism (AML/CFT) requirements for virtual financial asset (VFA) operators. The country’s Virtual Financial Assets Act, enacted in November 2018, brings all VFA issuers and service providers within the scope of AML/CFT regulations.

New Role: Virtual Financial Asset Agent

The Maltese regulator has created a new role, the Virtual Financial Asset Agent, to ensure that only fit and proper VFA issuers and service providers are able to register and obtain licenses. The Prevention of Money-Laundering and Funding of Terrorism Regulations have been amended to explicitly include all three VFA operators - VFA agents, VFA issuers, and VFA service providers - within their scope.

Comprehensive Framework

In addition to AML/CFT risks, Malta’s framework also addresses:

  • Cyber Risk: The Financial Institutions Analysis Unit has issued a consultation document providing sector-specific guidance for VFA operators.
  • Investor Protection: Transparency is ensured by bringing all key players within the scope of AML/CFT regulations.
  • Transparency: Malta’s comprehensive framework serves as a model for other countries seeking to regulate the cryptocurrency sector.

International Cooperation

Despite progress, significant challenges remain in regulating cryptocurrencies, including:

  • Anonymous Nature: Cryptocurrencies’ anonymous nature makes it difficult to identify and assess money laundering or terrorist financing risks.
  • Cross-Border Transactions: Cross-border transactions pose additional challenges for regulators.
  • Lack of Central Intermediaries: The lack of central intermediaries can make it difficult to track transactions.

International cooperation is seen as essential to address these issues effectively.

A Model for Regulation

Malta’s comprehensive framework serves as a model for other countries seeking to regulate the cryptocurrency sector. By bringing all key players within the scope of AML/CFT regulations, Malta has taken a crucial step towards ensuring transparency and trust in the VFA market.

European Institutions’ Efforts

The European Banking Authority has advised the European Commission to take into account the latest recommendations from the Financial Action Task Force (FATF), which emphasize the need to identify and assess money laundering or terrorist financing risks posed by new technologies, including virtual assets.