As the crypto-asset market stands between innovation and regulatory scrutiny, especially through the impending implementation of the European Union's Markets in Crypto-Assets (MiCA) Regulation, the Malta Financial Services Authority (MFSA) continues to establish itself as a progressive supervisor.
The MFSA's commitment to fostering a safe and compliant crypto ecosystem in Malta is showcased through its meticulous approach to regulating the virtual financial assets sector. Its recent publication, “The Nature and Art of Supervision”, provides a comprehensive overview of the Authority’s strides in regulating this high-risk sector that demands stringent checks and balances.
About the Framework
Malta is well-placed as one of the pioneering jurisdictions that introduced a framework that is very similar to MiCA – the Virtual Financial Assets Framework – in November 2018.
The MFSA devised this Framework to support innovation and new technologies for financial services in the area of crypto-assets while ensuring effective investor protection, financial market integrity, and financial stability. The standards set by the Virtual Financial Assets Act (VFAA) have proven to be effective in helping to achieve this. It has been an effective filter in ensuring the presence of serious market players with strong compliance frameworks, imposing standards that assess reputation, competence, conflicts of interest, independence of mind, and commitment. Such stringent fitness and properness checks act as a sieve, ushering in only those service providers which are committed to maintaining a robust compliance framework.
The experience that the MFSA has gained in the past five years has served to continuously challenge the Authority’s knowledge and understanding of the industry, while it built the necessary expertise on the road to becoming a crypto regulator. This has also contributed to a healthy level of preparedness as Malta plans to transition to the MiCA Regulation which is set to replace its current VFA framework.
Milestones in Numbers
Since the inception of the VFAA in November 2018, and taking a snapshot on 30 June 2023, the Authority has received 32 applications for Virtual Financial Assets Service Provider licences. Of these, 15 have been authorised, 14 were withdrawn or refused, and three are still in process.
The MFSA's oversight doesn't stop at authorisations; it spans proactive supervision and stringent enforcement measures. The 140 supervisory engagements between 2021 and 2022, inclusive of inspections, thematic assessments, and AML/CFT examinations, demonstrate a dedication to ensure compliance and consumer safety. In terms of enforcement, the MFSA issued 6 administrative measures or penalties, took two enforcement actions in relation to unauthorised activity, and issued 71 warnings.
The Power of Collaboration
The “Nature and Art of Supervision” publication also highlights the extensive collaboration between the MFSA, national and international bodies, including the Financial Intelligence Analysis Unit (FIAU) and the National Coordinating Committee on Combating Money Laundering and Funding of Terrorism (NCC).
As the MFSA's stride in regulating crypto-assets continues, the publication is not just a statement of past accomplishments but a roadmap illustrating the trajectory towards a more secure, compliant, and consumer-centric crypto landscape, under the MICA Regulation.
Increasing Consumer Awareness
The MFSA also focuses on public outreach, to ensure that consumers are aware of the risks and benefits associated with investing in crypto assets. The MFSA recently embarked on a comprehensive consumer outreach campaign featuring several online resources aimed at fostering a balance between a culture of prudence and bolstered consumer confidence. By proactively empowering consumers, the MFSA's campaign aligns with the Authority's broader commitment to ensuring not only a compliant ecosystem but also a safeguarded and informed consumer base. This consumer-centric initiative also symbolises the Authority’s comprehensive strategy aimed at fortifying both regulatory integrity and consumer well-being in Malta's crypto landscape.
