On February 16, 2018, the Government of Malta announced a consultation document on “The Establishment of the Malta Digital Innovation Authority; the Framework for the Certification of Distributed Ledger Technology Platforms and Related Service Providers; and a Virtual Currency Act.” The consultation period will close on March 9, 2018. Then the proposed bills will go to Parliament to become effective laws/regulations.
The consultation document proposes three distinct, but related bills:
- The Malta Digital Innovation Authority Bill (MDIA)
- The Technology Arrangements and Services Bill (TAS)
- The Virtual Currencies Bill (VC)
Together, the three bills inter-operate to produce a comprehensive and unique legal framework that offers legal certainty and regulatory coverage of Blockchain technologies and crypto-currencies.
The Malta Digital Innovation Authority Bill
The Malta Digital Innovation Authority will focus on innovation across all sectors of the economy, while protecting the public interest. In particular it will ensure that there is no overlap between other national competent authorities, when their regulatory actions address the same technological innovations.
To better coordinate cooperation between the MDIA and other regulators, the bill proposes the establishment of a “Joint Co-Ordination Board.” The MDIA will in no way restrain the autonomy or the supervisory functions of other regulators.
The Technology Arrangements and Services Bill
The Technology Arrangements and Services Bill will institute a framework for “Technology Arrangements.” Initially, such arrangements are typically those provided by Blockchain technologies, such as:
- Distributed Ledger Technologies (Private or Public Blockchains)
- Smart Contracts
- Decentralized Autonomous Organizations and similar
The framework recognizes particular subjects that will play a role in a registration or certification process. The subjects are:
- System Auditors
- Technology Service Providers
- Administrators (both technical as well as fiduciary)
A Technology Service Provider may seek registration with the MDIA, on a voluntary basis.
The System Auditors and the Adminsitrators need to be approved by the MDIA.
The framework will further address Private Law issues that arise around the deployment and use of Technology Arrangements.
The Virtual Currency Bill
The Virtual Currency Bill defines a Financial Instrument Test whereby clear criteria are given to determine if a Virtual Currency or an ICO should be considered as a financial instrument. In that case, existing investment services legislation applies, including among other MiFID and the Prospectus Directive. The intent is to ensure investor protection, market integrity and financial stability.
Even for ICOs / Virtual Currencies that do not qualify as a financial instrument, the bill sets out minimum transparency requirements, in particular for the kind of information that issues need to provide to prospective investors.
A significant expressed intent is that pure utility tokens would not qualify for any kind of regulation.