The Malta Financial Services Authority (MFSA) has published a proposal regarding investing in digital currencies.
So far, Malta only proposes rules for cryptocurrency investment and the rulebook is subject to change. The government of Malta is seeking public feedback and suggestions on how digital currencies can be regulated.
The authorities are primarily interested in potential stakeholders who have time until November 10 to bring all suggestions on board. Afterwards, the MFSA will consider them all and adjust the document accordingly.
The proposal was released to protect and safeguard the interest of investors and the integrity of the financial market as opposed to undermining the existent technology and cryptocurrency in general.
In the official statement the MFSA explains:
“The MFSA is developing a rulebook to regulate Professional Investor Funds (“PIFs”) which have the investment in virtual currencies as their investment objective. The MFSA is presently considering whether Alternative Investment Funds and Notified Alternative Investment Funds should also be allowed to invest in virtual currencies.”
The Summary of a Proposal
Due to a risk associated with investing in digital currencies, for the time being, the legal structure of Professional Investor Funds (PIFs) should be limited to SICAV (Investment Company with Variable Capital) and INVICO (Private Company) structures. Both of them require a board of directors, responsible for the overall business performance and its legislation.
The rulebook is based on already existing rules for PIFs, with an addition of specific regulations targeted towards cryptocurrency investment risks:
Competence – an investor would have to be in possession of a sufficient knowledge and experience in the field of information technology and its underlying technologies, including the Distributed Ledger Technology.
Risk Warnings – any potential risks should be included in the offering’s documentation for both direct and indirect investments in virtual currencies.
Quality Assessment – the appointed Investment Manager, is obliged to conduct an appropriate research to assess the quality and legitimacy of a cryptocurrency being invested into.
Risk Management – before investing, an Investment Manager should assess whether the risk of proposed cryptocurrency falls within the scope of the risk management policy.
Valuation – ensuring that appointed Service Providers have the business organisation and experience necessary to conduct the required verification and assessment of the cryptocurrency investment.
It is important to remember that Malta is not imposing a cryptocurrency regulation and centralisation. It is rather a risk assessment tool for investing in cryptocurrency.
The amount of ICO scams as well as writing cryptocurrency investments is significantly growing. And one of the reasons behind is lack of knowledge on virtual currencies.
Maltese authorities are aiming at changing the cryptocurrency landscape and its lousy name, which should work both sides. Investors will be more keen on trusting with their assets in virtual currencies, and the cryptocurrency market will suffer less due to fraud and scams.
Malta proposing rules for cryptocurrency investment is another step closer to its vision of becoming a #BitcoinIsland as well as a worldwide pioneer in blockchain technology.