Malta’s Financial Services Authority (MFSA) has initiated a public consultation period to discuss proposed changes to its crypto regulations. These changes are aimed at aligning Malta’s regulations with the Markets in Crypto-Assets (MICA) regulations set by the European Union (EU), which are scheduled to take effect in December 2024. The public consultation period will be open until September 29.
Malta first established its crypto framework in 2018 with the Virtual Financial Assets (VFA) Rulebook. However, with the introduction of MICA regulations, it has become necessary for Malta to update its existing regulations to align with the EU’s laws. The proposed revised rulebook includes changes to regulations for exchanges, custodians, and portfolio managers.
Some of the notable changes introduced in the revised VFA Rulebook include the removal of the systems audit requirement for VFA license holders. Additionally, the capital requirements for Class 3 and Class 4 license holders have been reduced to $133,000 (125,000 euros) and $159,000 (150,000 euros), respectively. The professional indemnity insurance requirement has also been removed, and the outsourcing requirements have been updated to align with MiCA.
Furthermore, the service-specific rules of MiCA have been incorporated into the VFA Rulebook. This includes amending the requirements for VFA exchanges, order execution, and client suitability. The new regulations also eliminate the requirements related to client categorization, as well as the need for a Risk Management and Internal Capital Adequacy Assessment Report.
With the passing of the MiCA regulations, all existing crypto regulations in EU member nations will be replaced by the universal MiCA laws. As an EU member, Malta had two options – either wait for 18 months for the MiCA laws to come into effect or modify the existing regulations to align with the EU laws. Malta’s regulators have opted for the latter approach.
In a recent interview, regulators stated that the early modifications to their existing crypto regulations would help VFA license holders transition seamlessly to the MiCA-based laws and obtain the EU license. Malta’s VFA framework was initially based on principles from the Markets in Financial Instruments Directive (MiFID), and MiCA draws several principles from the same rulebook.
France, another EU member nation, has also revised its existing regulatory guidelines for crypto to align with MiCA, effective from early 2024.
The public consultation period provides an opportunity for stakeholders to provide feedback and suggestions on the proposed changes. The MFSA is keen on gathering insights from industry participants to ensure that the new regulations are comprehensive and address the needs of the crypto industry in Malta. It is essential to strike a balance between facilitating innovation and promoting investor protection.
Overall, the alignment of Malta’s crypto regulations with the MICA regulations demonstrates the country’s commitment to fostering a favorable environment for digital assets and positioning itself as a prominent hub for the crypto industry within the EU. The revisions to the VFA Rulebook aim to streamline regulatory processes and create a robust framework that complies with the evolving EU standards.
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