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Distributed ledger technology (DLT) and virtual financial assets (VFA) in Malta

Malta has had a virtual financial assets regulatory framework since 2018.

As the regulator, the MFSA oversees the implementation of the VFA Act and the offering of four categories of VFA Licences to interested VFA Service Provider applicants as follows:

Class 1: Licence holders authorised to receive and transmit orders and/ or provide investment advice in relation to one or more virtual financial assets and/ or the placing of virtual financial assets. Class 1 Licence Holders are not authorised to hold or control clients’ assets or money.

Class 2: Licence holders authorised to provide any VFA service but not to operate a VFA exchange or deal for their own account. Class 2 Licence Holders may hold or control clients’ assets or money in conjunction with the provision of a VFA Service.

Class 3: Licence holders authorised to provide any VFA service but not to operate a VFA exchange. Class 3 Licence Holders may hold or control clients’ assets or money in conjunction with the provision of a VFA Service.

Class 4: Licence holders authorised to provide any VFA service. Class 4 Licence Holders may hold or control clients’ assets or money in conjunction with the provision of a VFA Service.

The MFSA introduced a Financial Instrument Test with the objective to determine whether a Distributed Ledger Technology (DLT) asset, based on its specific features, falls to be regulated under:

(i) the existing EU legislation and the corresponding national legislation namely covering MIFID I and II and the E-Money Directive (in which case the provisions of the VFA would not apply),

(ii) the Virtual Financial Assets (VFA) Act (in which case the provisions of the VFA would apply and applications