The Malta Parliament passed three cryptocurrency and blockchain bills into law recently, making Malta one of the first jurisdictions in the world to create a fully regulated environment specific to blockchain, cryptocurrency and digital currencies of all kinds. This legislation is significant because it assists in creating a framework that legitimizes blockchain businesses and ensures that those in the cryptocurrency market are compliant with the corresponding laws. It makes sense that Malta would act first, because they succeeded in capturing much of the worldwide e-gaming market, by creating a regulated environment for online gambling. The hope is that the new laws will help them to capture a large cross-section of the crypto and blockchain market as well. This article expands upon an article I wrote several months ago containing a shorter description of what makes Malta ideal for cryptocurrency initiatives. Here are the basic components outlined in each bill:
The Innovative Technology Arrangement and Services Act sets out the regulation and certification requirements for technology service providers and digital ledger technology, or DLT, platforms. The specific language of formalized regulation and certification will provide crypto-exchanges with more legal certainty when operating in Malta in an otherwise globally underdeveloped area of law.
The Malta Digital Innovation Authority Act formalizes the regulatory procedures for the DLT industry. This law creates Malta Digital Innovation Authority, or MDIA, by setting up a regulatory authority that will be responsible for overseeing the industry and supervising compliance with these newly enacted laws. It will focus on protection for consumers and promoting education for any DLT users.
The Virtual Financial Assets Act regulates initial coin offerings by setting up requirements for companies raising capital through ICOs, such as publishing a white paper detailing the project and making past financial history available to the public. This law also includes a financial instruments test that determines whether a virtual token is a DLT asset under the law. If the virtual token is a DLT asset, meaning it has no utility, value or application outside of the platform on which it is issued and cannot be exchanged for funds on the platform, then the token is exempt from this law. If the token is not considered to be a DLT asset, the regulators will apply existing EU securities and financial law definitions to assess the token.
As resources continue to be allocated to DLT, two major crypto-exchanges creating headquarters in Malta, and now the development of these advanced regulations, Malta is poised to achieve its goal in becoming “Blockchain Island.”
This legislation, however, is not only beneficial for Malta. It also has the potential to set a global precedent for how other markets could structure their own authoritative bodies in this realm and utilize Malta’s existing laws as a model to institute regulations. These new laws enacted by Malta suggest that blockchain and cryptocurrencies are becoming a more permanent fixture within the world’s business and financial culture.
We would like to thank our intern Jaclyn Wishnia for her contribution to this article.