The MFSA has on the 30th July 2018 issued a consultation paper on the Virtual Financial Assets rules for issuers of Virtual Financial assets. The closing date for submission was 13th August 2018 and now the MFSA is expected to issue the official chapter after taking into account the submissions which it has received as well as other consultations with relevant stake holders which it has carried out.
This paper is intended to form part of a rule book which will be entitled the ‘Virtual Financial Assets Rulebook’ and which will be divided into three chapters. This chapter applies to issuers of Virtual Financial Assets.
The first title of this chapter outlines the high-level principles which should guide issuers when issuing Virtual Financial Assets while title 2 sets out the general requirements for issuers which includes that the issuers must be legal persons and that the business is directed by two persons. Title 3 outlines the initial and ongoing requirements applicable to initial VFA offerings, which are mainly related to the requirements to register their white paper as well as the conditions to admit VFA assets on a DLT exchange. Title 4 provides details with regards to the administrative penalties and sanctions as well as the principles which will be guiding the MFSA when imposing administrative penalties.
This chapter also includes the MFSA’s interpretation on the transitory provisions provided for under Article 62(1)(a) of the Virtual Financial Assets Act.
This article will deal with the MFSA’s interpretation on the transitory provision provided for under Article 62(1)(a) of the Virtual Financial Assets Act, as well as Title 1 of Chapter 2 regarding the high-level principles which should guide issuers when issuing Virtual Financial Assets in or from within Malta.
Transitory provision under Article 62(1)(a) of the VFA Act
Article 62(1) of the VFA Act provides that any person who on the date of coming into force of the Act is undertaking an activity in terms of Article 3 of the Act, i.e. offering a virtual financial asset to the public in or from within Malta or applying for a VFA to be admitted to trading on a DLT exchange, must within 3 months from the date of coming into force of the Act, draw up a white paper and register it with the MFSA. This article continues to state that the transitory provision will only be applicable to those persons who would have commenced an offering or who would have applied for admission to trading on a DLT exchange by not earlier than two weeks prior to the coming into force of the Act.
The MFSA has clarified that an issuer will be able to benefit from the transitory period only where the pertinent offering is active and made to the pubic. Where an offer includes a pre-crowd sale and a crowd sale, such an offering will be deemed to have been commenced at pre-crowd stage, provided that such a sale is open to the public as opposed to a closed number of investors. The MFSA will shortly be issuing guidelines on hen an offering is deemed to be active and made to the public.
The application of the transitory period is also subject to a notification to be made by the issuer to the MFSA immediately upon the coming into force of the Act. The notification should include the issuer’s name, the name of the DLT asset and the date when the offering began or when the application for admission to trading was made. A copy of the determination made in respect of the financial instrument test (to determine whether the asset is a financial instrument, a virtual asset, electronic money or a Virtual Financial Asset) should also be attached to the notification.
Title 1 – High level principles
Issuers must act in an ethical manner and in Malta’s best interest, taking into account investor protection, market integrity and financial soundness in carrying out their activity. Issuers must cooperate with the MFSA and act honestly, fairly and professionally while complying with the Act, the regulations, rules and guidance issued from time to time by the MFSA.