An Analysis of Malta’s Three pronged Legislative Approach to Cryptocurrencies

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Malta’s MFSA

In March 2014, the Maltese government published a strategy titled Malta Digital Strategy in which the government outlined its ambitious plan to transform Malta digital landscape and facilitate exploitation of its geostrategic position and links with the EU, MENA and Africa. The then Parliamentary Secretary, Edward Zammit Lewis, pointed out the government’s recognition of the need for flexibility to cater to the rapid technological development. The strategy stressed the objective of attracting FDI in the sector through increased focus on knowledge and innovation-based investment and economic efficiency. Some of the key activities outlined in the Strategy included the adoption of supportive regulatory and legislative framework and the establishment of a governing body representing primary stakeholders.

Since mid 2017, a number of countries had decided to take note of the exponential growth of activities in the Blockchain (distributed ledger technologies – DLT space) and establish consultative bodies, task forces and /or study groups. The Maltese government was not left in these efforts.  In April 2017, the Maltese cabinet approved a National Blockchain strategy.

 

On 15th September 2017, the government established a Blockchain Taskforce which was entrusted with reviewing proposals made to it, as well as to make recommendations for a ‘clear roadmap’ to be taken by the Government to implement its National Blockchain Strategy.  The Taskforce was charged with, inter alia, exploring the setting up of a new regulatory function with “the primary objective of harnessing the technology with a legal operational framework, serving as a bold initiative leading to the formation of an ideal ecosystem for those willing to invest in blockchain technology,”

 

On February 16, 2018, the government launched a public consultation on the establishment of the Malta Digital Innovation Authority, the framework of the Certification of Distributed Ledger Technology Platforms and Related Service Providers. The Parliamentary Secretary Silvio Schembri, explained that the aim of the proposed framework is to offer legal certainty to a space that is currently unregulated, and touches on a number of issues, including types of authorisations, legal personality and the applicability of law to smart contracts.

Nigel Vella told us the proposed framework envisages the “creation of a Digital Innovation Authority, the voluntary registration of Innovative Technology Service Providers and the certification of DLT Platforms and related smart contracts categorised as Innovative Technology Arrangements”.

 

The consultation document outlined the government’s legislative approach and which operationalizes the said institutions are contained in three Bills of legislation namely:

 

  • The MDIA Bill will provide for the establishment of an Authority to be known as the Malta Digital Innovation Authority.
  • The TAS Bill will set out the regime for the registration of Technology Service Providers and the certification of Technology Arrangements.
  • The VC Bill will set out the framework for ICOs and the regulatory regime on to the provision of certain services in relation to VCs. The intermediaries subject to the VC Bill include brokers, exchanges, wallet providers, asset managers, investment advisors and market makers dealing in VCs.

We will provide summaries of the three legislations in separate article here

Ahmed Ali

Diacle