A few weeks after announcing future plans for the regulatory framework of blockchain-based platforms, virtual currencies and ICOs, Malta Cabinet approved the cryptocurrency and DLT bill.
Parliamentary Secretary for the Digital Economy Silvio Schembri also presented the three bills to Parliament for the first reading.
The bills include:
- Malta Digital Innovation Authority Bill
- Technology Arrangements and Services Bill
- Virtual Currencies Bill
Malta at The Forefront of Blockchain Technology
So far, Malta has experienced an extremely positive response from some of the biggest companies worldwide regarding the new legislation. Schembri himself commented on the overwhelming response that not only helped with improving the legislation draft but also attracted business to consider Malta as their next headquarters.
One of the other benefits mentioned by Schembri is providing the legal certainty for both – the companies working in the industry and moving to Malta as well as local banks which would be less reluctant to welcome these businesses.
The Malta Independent asked Schembri whether crypto and DLT companies have struggled so far with moving to the island due to banks’ restrictions. In response:
“I understand that nowadays we are operating within an environment that is not regulated [referring to Blockchain and cryptocurrencies]. I can understand the reluctance of banks not to open up accounts in this type of industry. I strongly believe that once these laws will be enacted, this will answer a lot of questions especially when it comes to Anti Money-Laundering and KYC issues. I can understand today’s situation, without these Bills we have these questions unanswered, but I think these bills will answer those questions.”
The Three Bills
The first draft of the bills was released to the public in February 2017 with a 30-day period of gathering the general feedback from industry leaders.
All three bills have been created to provide legal security for businesses and individuals planning to get involved with the world of Distributed Ledger Technology, such as Blockchain, as well as cryptocurrencies.
Malta Digital Innovation Authority
The new authority will work similarly to MFSA and its key function would be to certify DLT platforms.
Currently, due to an unregulated market, these platforms are not regulated and the use of them can result in fraud and substantial financial losses.
However, the creation of MDIA would bring to existence certified surveyors who could verify the information going through the platform. Providing the same with a legal certainty and trust; not mention the increase in efficiency.
Another aspect of the Authority would be to promote the governmental policies and promote Malta as a centre of excellence for innovative technology that facilitates the advancement.
Technology Arrangements and Services Bill
The second bill covers creating a regime for the registration of Technology Service Providers and the certification of Technology Arrangements through system administrators and auditors.
The current legislative framework doesn’t consider having contracts in a ‘smart’ format, and therefore it doesn’t offer proper regulation of smart contracts. With the help of TAS, the contract cannot be not validated just because of its ‘smart’ format.
To paint a real-life scenario; if someone decides to open a company using DLT, or an ICO, currently the individual doesn’t have to seek any regulatory framework.
With the new legislation, that individual would have to submit a TAS bill to the MDIA for approval and would have to comply with the developed legislation.
Virtual Currencies Bill
The third bill will set the framework for Initial Coin Offerings (ICOs) and the regulatory provision of services related to virtual currencies.
This framework aims at ensuring investor protection, market integrity and financial soundness through:
- Communicating all information to the investors through the White Paper
- Providing a license to anyone offering a service based on virtual currencies
- Introducing the ‘Financial Instruments Test’ by MFSA will have a power to issue directives, to adopt and publish rules, to require information, to suspend and ICO or to trade VC on an exchange
After Malta Cabinet approved the cryptocurrency and DLT bill, it will be presented to the Parliament for the first reading. Lastly, a debate will be ensued between both sides of the House before it is passed into law.
Read more about Malta Blockchain Regulations.