Malta has become one of the first jurisdictions to provide for a legal framework regulating token offerings and service providers in the cryptocurrency industry, such as exchanges.

Through the introduction of the Virtual Financial Assets Act (“the Act”), the legislator has introduced a framework whereby token issuers would be able to benefit from a degree of legal certainty, whilst simultaneously providing for investor protection to all third parties contributing or investing to or through the project.

Furthermore, the trading of digital assets has become facilitated using exchanges which provide a platform on which traders are able to efficiently trade in crypto-assets. Ensuring that traders and their assets are protected is one of the salient features being factored in by the legislation which also regulates the provision of other VFA Services such as OTC brokers, custody services, portfolio management and dealing on own account.

The Malta VFA framework provides for an enabling ecosystem whereby cryptocurrency operators, such as OTC brokers, custodians and exchanges can operate in a regulated environment whilst guaranteeing a level and secure playing field to the parties within the crypto transaction field.

The Maltese cryptocurrency license is divided into classes - from limited to a complex one, with increased requirements:

• Class 1 (receiving and transferring orders, consulting on virtual financial assets.

• Class 2 (VFA-services, transactions with foreign money without an exchange for own accounts).

• Class 3 (all operations without exchange).

• Class 4 (VFA-operations, including customer funds, custodial services).

Note that such licensed entity will not be able to list tokens that are classified as financial instruments under the MiFID II. For an exchange to be able to list such tokens, it would require to get a separate license under different legal frameworks applying for that particular category of the financial instrument.

An application for a license under the VFAA shall be made solely through a VFA agent duly licensed in terms of the Act, in the form and manner required by the MFSA. In addition an applicant has to correspond to the following requirements:

• Undertake a proper test and fitness check

• Have a physical presence

• Appoint a credible VFA agent

• Undertake and pass the Financial Instrument Test

• Initial share capital, liquidity and capital adequacy requirements. The minimum share capital of €730,000.

VS Consulting provides a multitude of services to operators in the Virtual Financial Assets (VFAs) industry including

• Conducting the financial instrument test for both Issuers and exchanges listing the token

• Drafting and review of white-paper;

• Drafting and review of the applicable policies, procedures and frameworks as required by the MFSA and ensuring that VFA clients are properly prepared for the submission of the applicable white-paper registration or VFA service application;

• White-paper registration with MFSA;

• Submission of VFA services application with MFSA;

• Advising on the legal and tax implications of the proposed VFA activities;

• Setting up of the legal structure (according to the best identified legal form suited for the structure);

• Drafting or review of the legal documentation including terms & conditions, privacy policies, private token offering documents and any other legal document which could be applicable;

• Tokenomics, post-ICO Token and Legal Management;

• Audit Verification Services both on and off blockchain;

• System Audit services as licensed by MDIA

• Drafting and review of Technology policies and procedures as required by the MFSA and MDIA.