Notices

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New ‘FinTech Regulatory Sandbox’ Proposed for Malta as Part of a new FinTech Strategy

The MFSA published a consultation document called ‘MFSA FinTech Strategy – Harnessing innovation through technology’ (the ‘Strategy’) which sets out the Authority’s vision ‘to establish Malta as an international FinTech hub which supports and enables financial services providers to infuse technology in product and service offerings to drive innovation’. The purpose of the Strategy is to enable key FinTech players, including but not limited to, start-ups and financial services incumbents, to develop innovative solutions or provide enhanced access to financial products. The Strategy is based on the successful implementation of various initiatives across six strategic pillars, namely regulations; ecosystem; architecture; international links; knowledge; and security.

Following in the footsteps of the Malta Gaming Authority (MGA) that had successfully implemented a sandbox for the use of DLT and the acceptance of virtual currencies within the remote gaming sector, the MFSA is now proposing a ‘FinTech Regulatory Sandbox’ which would provide entities ‘the space to operate in a controlled but fully functional services environment in which innovative new products, services, business models and delivery mechanisms can be tested, monitored and enhanced’. Whilst rigorous regulatory requirements are laudable and encouraged to safeguard the integrity of the financial services sector and related areas such as DLT, it will certainly be exciting to see to what degree of flexibility innovators will be allowed to operate in the proposed FinTech sandbox environment without being dissuaded by overregulation. In this regard, it is noteworthy that the MFSA has recognized regulatory proportionality as a strategic priority especially in relation to start-ups and other smaller, less complex entities.

Link to Document: https://www.mfsa.com.mt/wp-content/uploads/2019/01/MFSA-Fintech-Strategy-visual.pdf

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Chapter 3 of the VFA Rulebook Published

The Malta Financial Services Authority published Chapter 3 of the Virtual Financial Assets Rulebook for VFA Service Providers and a Circular to the Industry providing background to the new document.

Link to Rulebook 3: -https://www.mfsa.com.mt/wp-content/uploads/2019/02/VFAR_Chapter3_FINAL.pdf

Link to MFSA Circular: https://www.mfsa.com.mt/wp-content/uploads/2019/02/20190114_VFAR_Chapter3_Circular_FINAL3.pdf

Click out our latest article about the Rulebook’s salient parts:

MFSA publishes Rulebook on VFA Service Providers

MFSA issues clarifications on the Transitory Periods

The MFSA has issued clarifications on the applicability of the Transitory Provisions to ICO’s, Exchanges and other VFA Service Providers operating before 1st November 2018.

ICO Transitory Periods: The transitory period applies to those who on 1 November 2018 were undertaking an activity in terms of Article 3 of the VFA Act, which, inter alia, refers to the

offering of a VFA to the public in or from within Malta’.

In a ‘Circular to the Industry on the Transitory Provision Under Article 62 of the VFA Act’, dated 31 October 2018, the MFSA noted there have been a number of queries on what constitutes an ‘offering to the public’. In this regard, the Regulator announced that it will be publishing a definition of ‘offer of VFAs to the public’. This definition will be included in a revised version of the Glossary of Terms published on October 17.

EXCHANGES / SERVICE PROVIDERS: With reference to the provision of VFA Services (including exchanges), the MFSA said that it has been receiving numerous queries on the level of operations required for a person to be determined as providing a VFA Service, and thus be in a position to benefit from the 12-month transitory period. The MFSA clarified that

if a person has commenced its operations and has the ability to onboard-clients’, it may avail itself of the transitory period under the Act.