Malta has moved a step closer to introducing legislation to regulate the use of virtual currencies such as bitcoin, following the publication by the Malta Financial Services Authority (MFSA) of a regulatory framework covering collective investment schemes and the risks associated with virtual currencies. 

Regulatory Framework is First of Its Kind

The publication was welcomed by Parliamentary Secretary for Financial Services, Digital Economy and Innovation, Silvio Schembri, who described the regulatory framework being presented as the first of its kind. He said that it will make Malta the first jurisdiction to set-up a framework to ensure investor protection and financial soundness with regards to collective investment schemes that invest in virtual currencies.

According to Silvio Schembri, the regulatory framework is the first step towards having a Virtual Currency Act, and he added that work is currently being carried out on regulating Virtual Currencies (VCs), Initial Coin Offerings (ICOs), exchanges and the use of blockchain technology. He went on to say that the developments are another step towards sustaining Malta’s digital economy.

MFSA Consultation

The publication of the regulatory framework followed a consultation exercise by the MFSA on its proposed policy on the regulation of ICOs, VCs and related service providers.

The MFSA explained that its rules provide a policy framework that supports innovation and new technologies for financial services in the area of VCs whilst ensuring effective investor protection, financial market integrity and financial stability.

The MFSA wanted feedback from industry on its initial proposals that it could then incorporate into the development of a more detailed legal framework on ICOs, VCs and related service providers.

Blockchain Taskforce

The Government has previously expressed its desire to be one of the front-runners in blockchain technology, reports, and the publication of the regulatory framework is the latest in a number of key developments towards realising this goal.

Towards the end of last year it announced the establishment of a national Blockchain Taskforce, which is responsible for reviewing any proposals made to it and making recommendations for a clear roadmap to be taken by the Government to implement its National Blockchain Strategy. This aim of this strategy is to enable Malta to make the most of the opportunities presented by distributed ledger technology.

The Taskforce is chaired by Vincent Muscat, Permanent Secretary for the Parliamentary Secretariat, who is supported by seven recognised experts in the blockchain technology field.

When announcing the taskforce, the Government said that in addition to exploiting the opportunities that blockchain technology offers for added efficiency in public sector processes and services, it would be ambitiously looking into the setting up of a new regulatory function that would have the primary objective of harnessing the technology with a legal operational framework. This would then help Malta move towards the development of an ideal ecosystem for those willing to invest in blockchain technology.

It noted that it had received significant interest from local and international private investors and would remain open for the discussion of innovative ideas rendering this disruptive technology into a catalyst for the further growth of Malta’s digital economy.

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