Malta Moves to Regulate Cryptocurrency Market
Malta has taken a significant step towards regulating its cryptocurrency market by introducing three bills that aim to provide a framework for digital currencies and initial coin offerings (ICOs). The move aims to provide legal certainty for the industry and protect consumers.
Background on Regulation
Currently, Malta does not have any specific legislation governing cryptocurrencies. However, the government has issued several consultations and papers discussing regulation. In October 2017, a consultation document proposed a regulatory framework for collective investment schemes and investments in cryptocurrencies. Following this, the Malta Financial Services Authority (MFSA) published conditions for professional investor funds that invest in cryptocurrencies.
Discussion Papers and Conceptual Framework
The government has also issued several discussion papers on Initial Coin Offerings, Virtual Currencies, and Related Service Providers. These papers noted that while some cryptocurrencies may fall within existing financial services legislation, others would be outside the scope and thus unregulated. A further discussion paper presented a conceptual framework for digital ledger technology platforms to be subject to certification in Malta.
Three Bills Being Considered
The three bills currently being considered by the Maltese parliament are designed to provide a principles-oriented approach to regulation, aiming to prevent laws from becoming rapidly obsolete or stifling technological development. The bills are:
- Malta Digital Innovation Authority Bill (MDIA Bill): Establishes the Malta Digital Innovation Authority (MDIA), which would focus on innovative technology arrangements and their uses.
- Virtual Currency Bill: Establishes a framework for ICOs and a regulatory regime that would apply to certain services relating to cryptocurrencies, such as brokers, wallet providers, and virtual currency exchanges.
- TAS Bill: Establishes a regime for the registration of technology service providers and provides for the certification of certain technology arrangements.
Financial Instrument Test
The MFSA has proposed a “financial instrument test” to determine whether an ICO or virtual currency falls within the scope of existing legislation or requires compliance with new regulations. The test would be a two-stage process, determining whether a cryptocurrency is a financial instrument under existing law and then whether it is an asset under the proposed Virtual Currency Bill.
National Blockchain Strategy Taskforce
The government has established a National Blockchain Strategy Taskforce to advise on a framework for distributed ledger technologies. Additionally, the Malta Gaming Authority has stated that it is committed to allowing the use of cryptocurrencies by its licensees in the immediate future.
Challenges and Concerns
Despite the government’s efforts to regulate the cryptocurrency market, some banks have taken action against crypto-related transactions. For example, the Bank of Valletta, which is majority-owned by the Maltese government, blocked a cryptocurrency transfer, citing operational policies.
The Malta Gaming Authority has also announced that it will include virtual currencies under the definition of “money and, or money’s worth” in its new Gaming Bill. The authority stated that it is committed to allowing the use of cryptocurrencies by its licensees.
Global Context
The regulation of cryptocurrencies remains a complex issue globally, with most jurisdictions yet to enact specific laws governing digital currencies. However, Malta appears to be taking steps towards providing clarity and protection for consumers and investors in the cryptocurrency market.
Overall, Malta’s efforts to regulate the cryptocurrency market demonstrate its commitment to providing a stable and secure environment for innovation and investment.