From iGaming Pioneer to Crypto and Block Chain Hub

Over the years, Malta has gained renown as one of the top online gaming and betting jurisdictions for businesses wanting to establish themselves and prosper under local and EU regimes. This reputation primarily owes itself to Malta being the first EU Member State to regulate online gaming, thus gaining experience in the constant refinement of regulatory changes to accommodate the industry. 

The same impetus has recently been invested in crypto currencies and block chain innovations. Both technologies have been the subject of bad publicity spurred on mainly by banks and governments due to their complexities and lack of regulation worldwide. Malta, however, has sought to acknowledge the potential of such concepts and related technologies in relation to current financial frameworks. Over the past year, this has led to a joint effort between the Maltese government and local and foreign experts, whereby extensive studies and discussions have been undertaken in order to create and promulgate a regulatory regime covering crypto currencies and block chain technologies, say the Ecovis experts.

Approval of the Three Bills 
This collaboration has culminated in three bills – the Virtual Financial Assets Act, the Innovative Technology Arrangements and Services Act, and the Malta Digital Innovation Authority Act. These were published on 23rd May, 2018, which were eventually approved and enacted by Parliament.

The Acts provide broad-based principles within which market participants are expected to conduct themselves, as well as strict rules which market participants are bound to abide by. The legislation also focuses on merit-based and disclosure-based criteria. Under merit-based criteria, the regulator assesses and examines the service providers and products sold to investors and consumers, whilst disclosure-based criteria are designed to define what should be disclosed with respect to the platform or virtual/digital asset or currency.

The newly established regulatory body, the Malta Digital Innovation Authority (“MDIA”) will oversee the process of recognition and authorisation of virtual and digital assets and/or currencies and will establish whether the product is a currency or an asset according to set classification criteria. Furthermore, the MDIA will have the power to authorise and issue licences to service providers wishing to trade in the market.

Crucially, the Acts aim to ensure:

• consumer and investor protection, by providing transparency by means of due diligence, disclosure obligations, and recourse procedures through the investigatory and enforcement powers of the MDIA
• stability within the economy, by establishing standards promoting integrity and competence within the market. Virtual and digital assets/currencies and any related technologies will be vetted and audited by experts and specialists prior to being issued and sold to investors/consumers. Moreover, market participants will be subject to continuous disclosure requirements and advertisement controls to avoid any misleading contents being divulged to investors/consumers.
• economic efficiency and safeguarding confidence and trust in the system, by imposing strict anti-money laundering, data protection, investment and financial regulations, consumer protection, and competition law obligations, through coordination with other local and international authorities and organisations

Apart from the above general objectives, Ecovis explains that the intent of the proposed legislation is to secure the promotion and development of the technologies and related entrepreneurship, whilst fostering progress in accordance with the general principles of the law.

The legislation has since attracted the attention of a number of key players in the industry worldwide, including some major experts and professionals. As had happened with the iGaming industry, the pioneering development of a legislative framework has provided the impetus required to put Malta on the map in relation to another innovative industry, with exciting prospects ahead.

Author:
Maximilian Ebejer LL.D., lawyer, specialising in regulatory compliance and tax, ECOVIS GRC Limited, Balzan, Malta
max.ebejer@ecovis.com.mt