A few days following the implementation of Malta’s comprehensive DLT framework, the MFSA has published the much-awaited applications through which service providers can apply for authorisation to occupy the role of ‘VFA Agents’. Following the registration of the first wave of VFA Agents, the MFSA is expected to begin accepting licensing applications of service providers operating in the Virtual Financial Asset (‘VFA’) sphere. 

The Virtual Financial Assets Act (‘VFAA’) and its subsidiary regulation contemplate four classes under which service providers offering VFA services in or from within Malta must obtain a licence, unless otherwise exempt from such requirement. The most highly publicised type of service provider is the VFA exchange, that is an entity which permits the exchange of fiat currency to VFAs and vice-versa or the exchange of VFA to VFA.

However the remit of the VFAA’s licensing regime extends far beyond VFA exchanges.  Legal persons providing VFA-related investment advice and receiving and transmitting orders, for instance, are also required to obtain a licence under the VFAA. In fact, the list of service providers required to obtain a licence under the VFAA is largely lifted from the current legislative framework governing traditional investment services.

While the underlying digital asset is arguably an unprecedented type of asset (it is decentralised or distributed in nature, particularly volatile and totally intangible)  a number of activities required of VFA service providers are inherently similar to those undertaken by traditional financial services providers.The VFA exchange, on the other hand, introduces novel considerations which, although mimicked by traditional exchanges, require close attention.  Their varying forms, exclusive digital presence and global reach present new challenges for regulators and, in Malta’s case, VFA Agents.

This piece forms part of Camilleri Preziosi’s ‘Beyond Blockchain’ weekly series, in which members of the firm’s Blockchain and Fintech teams map out how the landscape has evolved since the ‘Unravelling Blockchain’ series published earlier this year. For further information please contact blockchain@camilleripreziosi.com.

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