Against the background of the classification of crypto assets as securities and its European Blockchain Partnership, Malta proposed a new test to determine whether a crypto asset is a security in April 2018.
Malta Financial Services Authority
Malta’s FSA, seeking to create a more welcoming environment for cryptocurrency investment, has released the three-pronged test for public scrutiny. Firstly, the Act determines whether the ICO-derivative asset acts as a utility token. Those digital assets which can be traded on secondary markets would then move to the test’s second stage involving the application of European securities definitions to the crypto asset in question. Lastly, should a token struggle to meet a neat definition in the second stage, a hybrid of European and Maltese legislation would be applied to determine whether the asset may be regulated under Malta’s Virtual Financial Asset Act.
The proposed Financial Instrument Test was open for public comment until 5th May and since its introduction, it now governs all ICOs conducted in Malta.
Regulation Done Right
Malta has proposed and adopted three blockchain bills – the Malta Digital Innovation Authority Act, the Innovative Technological Arrangement and Services Act and the Virtual Financial Asset Act. The three allow Malta’s Digital Innovation Authority to effectively supervise blockchain projects within its borders. Given the clear structure of regulation within Malta, it is no surprise that companies including OKEx, BitBay and Binance have relocated to Malta.
Additionally, the three-step Financial Instrument Text creates a framework for international regulators to adopt in order to diagnose the legality of crypto assets and ICOs within their own borders. Altogether, this creates an environment for regulation conducive to blockchain use and development, and with Malta’s membership within the European Blockchain Partnership, it is likely that much-needed, progressive European legislation may result.
On 18th October, the Times of Malta reported that only 39% of 250 applications had passed Malta’s cryptocurrency agent certification exam, despite efforts to increase the pass rate. This exam is required for agents to receive cryptocurrency certification and is necessary for all practitioners working within the field, ranging from lawyers and accountants to auditors. This concept was introduced by Malta’s Virtual Financial Assets Act, which comes into force in November, and as such, all those working within cryptocurrency require appropriate certification. Training for this exam began in September and the exam was conducted in an MCQ format with a negative marking scheme. While the performance of applicants is sub-par, the low pass rate demonstrates that standards have not been loosened to paint a false picture. This is important because it signals that Malta is taking its responsibility at the forefront of progressive cryptocurrency legislation seriously. Given a cryptocurrency agent’s central role within the Maltese cryptocurrency regime, it is to be expected that those passing the test and receiving appropriate certification can be relied upon by projects both within and outside Malta’s borders.
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