THE VFA RULES FOR VFA ISSUERS (2)
The MFSA has on the 30th July 2018 issued a consultation paper on the Virtual Financial Assets rules for issuers of Virtual Financial assets. The closing date for submission was 13th August 2018 and now the MFSA is expected to issue the official chapter after taking into account the submissions which it has received as well as other consultations with relevant stake holders which it has carried out.
This paper is intended to form part of a rule book which will be entitled the ‘Virtual Financial Assets Rulebook’ and which will be divided into three chapters. This chapter applies to issuers of Virtual Financial Assets.
The first title of this chapter outlines the high-level principles which should guide issuers when issuing Virtual Financial Assets while title 2 sets out the general requirements for issuers which includes that the issuers must be legal persons and that the business is directed by two persons. Title 3 outlines the initial and ongoing requirements applicable to initial VFA offerings, which are mainly related to the requirements to register their white paper as well as the conditions to admit VFA assets on a DLT exchange. Title 4 provides details with regards to the administrative penalties and sanctions as well as the principles which will be guiding the MFSA when imposing administrative penalties.
This chapter also includes the MFSA’s interpretation on the transitory provisions provided for under Article 62(1)(a) of the Virtual Financial Assets Act.
This article will deal with Title 2 of Chapter 2 of the rule book which mainly deals with the general requirements for issuers.
Title 2 – Requirements for issuers
An issuer must be a legal person duly formed under any law in Malta. Its business must be directed or managed by at least 2 individuals. It must also commence the offering of its Virtual Financial Assets to the public or proceed to admit its VFAs to trading on a DLT exchange within 6 months from the date of registration of the white paper with the MFSA.
Prior to offering such a DLT asset to the public or admit the asset to trading, the issuer must undertake the financial instrument test to determine whether the DLT asset qualifies as a VFA. The financial instrument test must be signed by the board of administration of the issuer and endorsed by the VFA agent.
The MFSA will not be making any determinations of its own on the nature of the DLT asset but shall rely on the determinations made by the issuer and its VFA agent.
The issuer’s board of administration shall be responsible for ensuring that the issuer complies with its obligations under the rules and any guidelines issued by the MFSA. It also has an obligation to acquire and maintain sufficient knowledge and understanding of the issuer’s business to enable it to discharge its duties.
The board of administration must:
act honestly and in good faith
exercise reasonable care, skill and diligence
exercise their powers in line with the law
exercise their powers in an independent manner and without subordinating such powers to the will of others
monitor the functions delegated to the issuer’s functionaries to ensure that they are performing their functions in accordance with their contractual obligations
identify and manage the risks of the issuer and its activities
continuously monitor compliance with the requirements related to cyber security, record keeping and IT infrastructure
avoid conflicts of interest wherever possible and where it is not possible disclose such a conflict
establish a good governance framework
be responsible for the issuer’s compliance with its AML / CFT requirements
The Board of administration of the issuer must inform itself of the activities of the issuer and have a proper understanding of its financial condition. The delegation of powers to third parties will not absolve the board of administration from the duty to supervise the discharge of such delegated functions.
Minutes taken during meetings of the board of administration are to be held in Malta at the issuer’s registered address or at any other place as may be agreed with the MFSA.
How can we help?
Please contact us for a free initial consultation on how we may be able to assist you. We can assist you in setting up your company in Malta, setting up a bank account for the Malta company, drafting and / or reviewing the white paper which would have already been prepared. We can also assist by providing you with the initial legal advice on the type of token which you intend issuing i.e. whether the token is a financial instrument, a virtual token, electronic money or a Virtual Financial Asset. We can also assist you in the preparation and submission of the application and the supporting documentation to register your white paper in terms of the VFA Act and / or to obtain a licence to operate a crypto currency exchange in or from Malta.
We are also publishing on a regular basis updates about blockchain, DLT, VFA exchanges and ICOs and encourage you to get in touch with us if you would like us to keep you duly updated about regulatory development in this area. If you would like to receive such updates, or if you have any queries, please do not hesitate to contact us on [email protected].
Apart from its offices in St. Julian’s Malta, ACT operates from a second office in Gozo, which is situated in the capital city of Victoria. For an appointment in our Gozo office, please call on 00356 21378672 or send us an email on [email protected].
This article contains general information only and is not intended to address the circumstances of any particular individual or entity. ACT, by means of this article is not rendering any accounting, business, financial, investment, legal, tax, or other professional advice or service. This article is not a substitute for such professional advice, nor should it be used as a basis for any decision or action that may affect your finances or your business. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. Before making any decisions or before taking any action that may affect your finances or your business, you should consult a qualified professional adviser. ACT shall not be responsible for any loss whatsoever sustained by any person who relies on this article.
14th September 2018
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