Malta is running to become the Crypto-State

The Malta Financial Services Authority (FSA) has published a publicly available consultation paper on April 13, 2018. The article acts as a vehicle for collecting feedback from the general public over the test’s effectiveness. The paper details the Financial Instrument Test, which would then be a part of its proposed Virtual Financial Asset Act (VFAA).

The authority informed that the approach of this ‘test’ had been constructed concerning the response received from its previous analysis which enumerated a similar concept and was published in November 2017.

As stated, the test is made up of a three-stage procedure that makes certain that a Distributed Ledger technology (DLT) asset, as coined by the industry, is a part of the category “virtual tokens.”

The paper states that the “virtual token” is deemed to be a DLT asset when it commands to utility, value or application outside of the DLT platform on which it has been issued. These tokens cannot be exchanged for funds on such platforms or with the issuer of such DLT assets.

Tokens that fall under this category would be excused from the VFAA, states the FSA.

The test’s second stage consists of assets that can be traded on a secondary market. Here, multiple definitions of ‘securities’ – brought into effect by European Financial Regulators – shall be applied. This includes transferable securities, money market instruments, and financial derivatives.

If a digital token falls under the category of any of these assets, it would be classified under the administrative error of the prevailing Markets in Financial Instruments Directive (MiFID) that is imposed within the European Union Financial Markets.

In contrast, that which would keep the token from being a security is a negative result in stage two leading to stage three: Its classification as regulated under the presented VFAA. The FSA concluded that this method would enable a hybrid substructure that makes use of both prevalent EU regulations, as well as national ones.

Proposed to cover all ICOs organized in Malta, the paper is currently open for public input until May 5, 2018.

In addition, two of the world’s largest cryptocurrency exchanges plan to make the tiny European nation of Malta a central hub of their operations, and analysts say others are sure to follow. Officials on the Mediterranean archipelago, the European Union’s tiniest member, are aiming to boost its fortunes by becoming one of the world’s friendliest jurisdictions for a sector that’s caused concern among other regulators.