The first Malta Blockchain Summit was held on November 1 and 2, 2018 with four topics that were presented:
- regulation
- marketing and affiliation
- fintech, tokenomics and cryptocurrencies
- blockchain for developers.
On the first day of the Malta Blockchain Summit 3 laws, that were passed by the Maltese Parliament in July 2018 entered into force: Malta Digital Innovation Authority Act, Innovative Technology Arrangements and Services Act and Virtual Financial Assets Act.
According to the enacted laws, the purpose of the new legislation is to endeavor to promote development of innovative technology in as wide a manner and for as many uses as possible so as to achieve its benefits in as many economic and social sectors as possible, including, but not limited to, financial services, health and education, voluntary organizations, public administration and transport.
The Malta Digital Innovation Authority Act established the Malta Digital Innovation Authority (“MDIA”) as a competent authority to promote and develop the innovative technology sector in Malta by means of proper recognition and regulation of relevant innovative technology arrangements and related services. The main goals of the MDIA are:
- to promote the governmental policies that favor deployment, within the public administration of innovative technology arrangements, by the Government where necessary or appropriate;
- to promote education on ethical standards and legitimate exploitation of innovative technology arrangements;
- to protect users of innovative technology arrangements, including consumers and the public in general and to ensure standards to meet their legitimate expectations and protect against misuse;
- to harmonize practices, and, where applicable, to facilitate the adoption of standards, on innovative technology arrangements in Malta in line with international norms, standards, rules and, or laws and with those of the European Union in particular.
MDIA is responsible for the voluntary certification of innovative technology arrangements (“ITA”) that are defined as the intrinsic elements including software, codes, computer protocols and other architectures which are used in the context of DLT, smart contracts and related applications as well as other arrangements as may be further defined by the authorities.
Although the recognition for any innovative technology arrangement or services are voluntary, it is important to point out that every entity involved in any ITA shall respect the principles of best practice and business shall be conducted with honesty and integrity and all rights, interests and needs of each customer must be communicated to them in a fair clear and non – misleading way.
Virtual Financial Assets Act (“VFA Act”) regulates the field of Initial Virtual Financial Asset Offerings (commonly known as “ICO” – initial coin offering) and Virtual Financial Assets (“VFA”).
Virtual Financial Assets are defined as any form of digital medium recordation that is used as a digital medium of exchange, unit of account, or store of value, that is not: a. electronic money, b. a financial instrument or c. virtual token (that is defined as a form of digital medium recordation that has no utility, value or application outside of the DLT platform or which it was issued and may only be redeemed for funds on such platform directly by the issuer of such DLT asset).
The provision of the VFA Services is a subject to the license that shall be issued by the competent authority – Malta Financial Services Authority.
VFA Act defines the Initial VFA Offerings (hereinafter: “ICO”) as a method of raising funds whereby the issuer, a Maltese based legal entity, is issuing a virtual financial asset in exchange for funds. In order to perform the ICO, the issuer shall prepare and Malta Financial Services Authority (MFSA) shall register the whitepaper.
According to the First Schedule to VFA Act the whitepaper shall contain the information which is necessary to enable investors to make a valuation of the ICO and the issuer, as well as virtual the financial asset. This information shall be presented in an easily analyzable and comprehensible form.
All activities related to the ICO, starting from the submission of the application for the license as well as process and compliance with the law shall be followed by the certified VFA Agent. The VFA Act established the principles of the issuer’s conduct whereby the issuer shall conduct its business with due skill, care and diligence, with honesty and integrity, fair, clear and non – misleading manner. The issuer is liable for damages sustained by a person as a direct consequence of such person having bought virtual financial assets either as part of as initial VFA offering or on a DLT exchange, on the basis of information contained in the whitepaper, website or advertisement.
Based on the above mentioned, the new legislation introduces discipline and responsibility for ICO issuers that were the missing part during past time whereby the ICO investors were not legally protected. Although this legislation is not complete and is not enough to give the answers on all pending issues this is good approach for recognition of the ICO as regulated process and can be an example for other jurisdictions that are willing to make changes of its legislation.
Željka Motika, attorney at law
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