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In June 2019, the Financial Action Task Force (FATF) established various rules to combat the misuse of virtual assets for the purpose of money laundering and financing of terrorism. The funds travel rule featured in the FATF’s recommendations as well as it requires Virtual Asset Service Providers (‘VASPs’) to collate and share information about the sender (originator) and receiver (beneficiary) whilst undertaking a transaction.

Initial coin offering (ICO) campaigns, sometimes referred to as ‘token sales’ or ‘token-generating events’ (TGE), which raise funds for a venture through the issue of a cryptographic token in exchange for digital currency (fiat or virtual) may be paralleled to online crowdfunding campaigns or initial public offerings (IPOs).

A study published by the European Parliamentary Research Service (EPRS) seeks to examine whether the European Data Protection Regulation and the ancillary framework (GDPR) can coexist with the peculiar nature of blockchain technologies. The study argues that the multiple points of friction which have emerged between the GDPR and blockchain technologies are mainly due to three factors:

Malta was the first country to enact a comprehensive regulatory framework to cater for ICOs. This move to regulate initial coin offerings inspired other regulators around the world to move to regulate the space themselves.

Progress in finance has facilitated the exchange of value to an automated process, but behind the scenes it has been a centuries’ long process to get where we are today.

Many predict that DLT is reinventing and transforming key industries and creating new business models, making every transaction transparent, democratic, decentralized, efficient and secure. The belief in blockchain’s potential is so widespread that financial and tech entities have invested an estimate of $1.4 billion in 2016, which is expected to go up to $2.1 billion in 2018.

No doubt that blockchain technology presents many opportunities that will keep transforming the financial space. The disruptive technology is exponentially opening up international markets the same way the internet transformed access to information. For those that recognize what blockchain technology has to offer, its potential has no barriers, both for entrepreneurs and consumers who will be able to gain access to any service or assets they need where they are and when they need them.

The Financial Intelligence Analysis Unit (FIAU) has published a document for consultation which covers the application of Anti-Money Laundering and Countering the Funding of Terrorism (AML/CFT) obligations by the Virtual Financial Assets (VFA) sector. The guidance notes will apply to VFA agents, VFA issuers and VFA licence holders.

The MFSA has published further material with regards to the Virtual Financial Assets Regulations. The rules place heavy emphasis on the level of competence that prospective VFA Agents are required to have, both in terms of the traditional financial services framework as well as the regulatory framework developed under the Virtual Financial Assets Act.

Commerce is increasingly digital. Yet, the global tax system is still geared to the needs of a traditional ‘bricks and mortar’ economy. The OECD’s Base Erosion and Profit Sharing (BEPS) Action Plan recognises the need for modernisation and has achieved quite a lot since the issue of its reports in October 2015. However, specific recommendations on digital taxation have been limited and the OECD’s calls for an international consensus on the way forward have so far been unheeded.

Cryptocurrency is digital or ‘virtual’ money, which uses cryptography to secure its transactions, to control the creation of additional currency units, and to verify the transfer of assets. Cryptography itself describes the process by which codes are written or generated to allow information to be kept secret.

Despite Malta’s size and limited resources, Malta has been determined to be at the forefront of the blockchain technology, providing a regulated and tech-friendly framework for the blockchain and fintech industry. This has ensured a constant and ever-growing interest by international businesses and start-ups who are looking at investing in this sector, including the likes of Binance, OKex, Tron and BigOne.

The first of their kind in the world, three bills have come into force in Malta governing cryptocurrencies, blockchain and distributed ledger technology (DLT). The bills include the Malta Digital Innovation Authority Act which will bring about the establishment of the Malta Digital Innovation Authority as a driving regulator of the industry, as well as the Innovative Technological Arrangement and Services Act and the Virtual Financial Asset Act.

The Malta Financial Services Authority (MFSA) has released a Consultation Paper on the proposed introduction of a Financial instrument Test relating to its ongoing cryptocurrency regulation. The new consultation paper describes the introduction of a 'Financial Instrument Test' that would legally define virtual tokens.

Malta government has launched a consultation paper covering the framework relating to distributed ledger technology, ICOs and cryptocurrency exchanges and wallet providers dealing in such assets.

The IFSP conference took place today at Xara Lodge with an exceptional attendance from Malta’s leading financial services industry players. Running with the theme efficiency and innovation.