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 the requirements that issuers have to appoint and have at all times a number of functionaries.

Title 2 – Requirements for issuers (continued) - Functionaries

An issuer must appoint and have in place at all times the following functionaries:

  1. Systems auditor

  2. VFA agent

  3. Auditor and

  4. Money Laundering Reporting Officer (MLRO)

An issuer may also appoint a Custodian for the safe keeping of its assets and investors’ funds.

The issuer must ensure that its appointed functionaries have sufficient knowledge and experience in the filed of information technology, DLT assets and their underlying technologies as well as maintain sufficient knowledge and understanding of the issuer’s business to enable them to discharge their functions in a diligent manner.

Systems auditor

The issuer must seek the MFSA’s consent prior to the appointment or replacement of a systems auditor.  The systems auditor shall be responsible for reviewing and auditing the issuer’s technology arrangements.  The issuer must have a signed letter of engagement with the systems auditor clearly defining the latter’s responsibilities and the terms of his appointment.  The LOE shall include terms requiring the systems auditor to:

  1. provide such information or verification as requested by the MFSA

  2. afford another systems auditor any assistance he may require

  3. vacate his office if for any reason he becomes disqualified to act as a systems auditor

  4. notify the MFSA if he resigns, is removed or not reappointed and of the reasons for ceasing to hold office as well as other matters which he considers should be brought to the MFSA’s attention

  5. report immediately to the MFSA of any fact or decision of which he becomes aware which constitute or is likely to constitute a material breach of the legal and regulatory requirements to the issuer.

The systems auditor is required to prepare on an annual basis a systems audit on the issuer’s Technology Arrangement’s compliance with any standards and guidelines as set out by the Malta Digital and Innovation Authority (MDIA).  A copy of this report should be held at the issuer’s registered address and made available to the MFSA upon request.

The issuer shall also ensure that its systems auditor, prior to the commencement of the offering of the VFAs, has prepared a report which covers all aspects of its Technology Arrangements.  A copy of such a report must be held in Malta at the issuer’s registered address and made available to the MFSA upon request.

The issuer shall also ensure that the systems auditor, prior to the commencement of the offering of the VFAs, checks and certifies that nothing in the Technology Arrangements used, shall contain any right to unilaterally mutate, amend or destroy without leaving trace the technology arrangements used.

VFA agent

An issuer shall seek the MFSA’s consent prior to the appointment or replacement of a VFA agent.  Where the issuer appoints more than one VFA agent, the issuer shall establish how responsibility is to be allocated and inform the MFSA accordingly.

All communications, meetings, notifications and submissions to the MFSA are made through its VFA agent.  The issuer must collaborate in an open and honest manner with its VFA agent and provide him with any information he may require with regards to the fitness and properness assessment the VFA agent may conduct in respect of the issuer as well as with regards to the preparation of the compliance certificate.

The issuer must provide confirmations to the VFA agent that:

  1. Its Board of administration has established procedures which provides a reasonable basis for the said board to take proper judgments as to the prospects and the financial position of the issuer

  2. It has provided investors with a road map which clearly establishes and sets out milestones for the Initial VFA offering

  3. Any profit forecast or estimates have been made after due and careful enquiry

  4. Financial information presented in any document published by it has been properly extracted from its accounting records


The auditor must be approved by the MFSA and shall have business organization, systems, experience and expertise to act as an auditor to an issuer.  The issuer must obtain from its auditor a signed letter of engagement defining clearly the extent of the auditor’s responsibilities and the terms of his appointment.

The LOE must include terms requiring the auditor to:

  1. Provide information or verification to the MFSA

  2. Afford another auditor any assistance he may require

  3. Vacate his office, if for any reason he becomes disqualified to act as an auditor

  4. Notify the MFSA if he resigns, is removed or not reappointed and of the reasons for his ceasing to hold office as well as any matters he considers should be brought to the attention of the MFSA

  5. Report immediately to the MFSA any fact or decision of which he becomes aware in his capacity as an auditor which constitutes or is likely to constitute a material breach of the legal and regulatory requirements to the issuer.

The auditor must also prepare a management letter in accordance with International Standards on Auditing.

Money Laundering Reporting Officer (MLRO)

The role of an MLRO is an onerous one and the issuer shall ensure that it is only accepted by individuals who fully understand the extent of responsibilities attached to the role.  The MLRO must be a senior employee of the issuer or a member of the board of administration.


An issuer may appoint a Custodian for the safekeeping of its assets and investors’ funds.  The issuer must seek the consent of the MFSA before appointing or replacing a Custodian.

The Custodian must be a legal person and is in possession of a license to provide the services of a Custodian.  He must also have appropriate systems and controls in place to ensure that the investors’ funds are reimbursed if the initial VFA offering is cancelled including where the soft cap as stated in the issuer’s white paper has not been reached.

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.  

15th September 2018


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