By Cressida Scorfna, Lead Associate within the Corporate and Regulatory Team
Upon closure of the relative consultation period, the Malta Gaming Authority (MGA) has published a new policy pertaining to operators leveraging virtual assets.
The policy came into effect as from Monday 30 January 2023 and aims to serve as an operative substitution for the MGA’s Guidance on the use of Innovative Technology Arrangements and the acceptance of Virtual Financial Assets and Virtual Tokens through the implementation of a Sandbox Environment (the ‘Sandbox Framework’). The MGA is simultaneously also updating the System Documentation Checklist, System Audit Checklist, and System Review Checklist whereby necessary amendments have been made in order to reflect the changes brought about by the Policy.
Essentially, the purpose of the new Policy is to provide a thorough and modern outline of the MGA’s position vis-à-vis the Distributed Ledger Technology (DLT) applications and to, as much as possible, streamline the requirements previously applicable through the Sandbox Framework using the regulatory experience gained over its period of operation as a good basis of what is required; whilst also remaining in line with the MGA’s regulatory objectives.
According to the Policy, the Authority’s approval must be obtained before an operator is able to use and/or accept DLT assets on their gaming platform, which means that the MGA must be provided with all the information prior to granting approval. The latter normally consists of all the information regarding the Virtual Financial Asset (VFA), Virtual Token or the instrument involved, and may also potentially include a request for a legal opinion. DLT assets falling under the definition of financial instruments or electronic money, may only be accepted as a means of payment on a case-by-case basis by the MGA. By way of first step, therefore, an operator would be required to classify each DLT asset it intends to interact with, in accordance with the Virtual Financial Assets Act and the Financial Instrument Test.
Under this Policy, operators shall be permitted to accept VFA deposits using their own wallets without any intermediary to process the transaction and have custody of the assets. When the operator wishes to set up such wallets on its platform, the MGA must be consulted, and its approval must be obtained. The operator would need to provide all the policies and procedures which shall pertain to the wallet. The operators will additionally be able to use smart contracts on their platforms and shall be able to host games or game components fully or partially in a DLT environment.
It is salient to note, however, that operators are expected to adhere to their obligations as subject persons. Therefore, for instance, smart contracts need to be deployed in such a manner which enables the operator to adhere to any CDD obligations stemming from Anti-Money Laundering and Counter Financing of Terrorism legislation. Moreover, operators are expected to take the appropriate measures to mitigate the risks stemming from such operation by carrying out the necessary risk assessments and reflecting this accordingly in their policies and procedures.
Please visit the following link for further details: The MGA publishes its Policy on the use of Distributed Ledger Technology by Authorised Persons - Malta Gaming Authority
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