4 Different Crypto Licenses in Malta explained

A lot of hype is being gen­er­at­ed (and right­ly so!) about how Mal­ta is going to reg­u­late and licence vir­tu­al finan­cial assets (VFAs) when oth­er coun­tries are treat­ing VFAs as hot pota­toes. But what exact­ly IS reg­u­lat­ed licenced? Is it the VFA itself? Is it the com­pa­ny issu­ing the VFA? What about ser­vices relat­ing to VFAs? So many ques­tions but real­ly and tru­ly the answers are quite sim­ple.

The short answer is that the VFA offer­ings and their respec­tive white papers will be reg­u­lat­ed Mal­ta Finan­cial Ser­vices Author­i­ty (MFSA), and the ser­vices relat­ed to VFAs will be reg­u­lat­ed and licenced by the MFSA. So, whilst VFA offer­ings them­selves do not need a licence (but their white paper needs to be sub­mit­ted to the MFSA BEFORE the issuance actu­al­ly hap­pens), ser­vices relat­ing to VFAs need a licence.

Licenced VFA Activities

Whilst there are FOUR kinds of VFA Licences, such licences cov­er EIGHT VFA Ser­vices – which are the fol­low­ing:

  1. Recep­tion and Trans­mis­sion of Orders;
  2. Exe­cu­tion of orders on behalf of oth­er per­sons;
  3. Deal­ing on own account;
  4. Port­fo­lio Man­age­ment;
  5. Custodian/Nominee Ser­vices;
  6. Invest­ment Advice;
  7. Plac­ing of Vir­tu­al Finan­cial Assets;
  8. Oper­a­tion of a VFA Exchange.

If these ser­vices found famil­iar, then you prob­a­bly came across them in some form of EU trans­po­si­tion of the MiFID2 reg­u­la­tion, which is a good thing, as then you prob­a­bly know what these ser­vices entail – of course, with some (or a lot actu­al­ly!) VFA sprin­kled on top!

VFA Licence Classes explained

Each of the four VFA licence class­es will encap­su­late the eight VFA Ser­vices list­ed above. The first class of licence is the Class 1 Licence (duh!). Class 1 Licence hold­ers will be licenced to con­duct the ser­vice of recep­tion and trans­mis­sion of orders (Ser­vice Num­ber 1 above), pro­vi­sion of invest­ment advice (Ser­vice Num­ber 6) and the plac­ing of Vir­tu­al Finan­cial Assets (Ser­vice Num­ber 7). Hold­ers of this licence will need to hold an ini­tial cap­i­tal require­ment of €50,000 OR €25,000 and Pro­fes­sion­al Indem­ni­ty Insur­ance. Giv­en that such ser­vices will be licenced and reg­u­lat­ed by the MFSA, licence hold­ers will need to pay a year­ly super­vi­so­ry fee. This super­vi­so­ry fee for Class 1 Licence Hold­ers will be €5,500 for rev­enue up to €50,000 plus €700 per €50,000 rev­enue tranche there­after.

Class 2 Licence hold­ers are able to pro­vide ANY of the eight above-men­tioned VFA Ser­vices EXCEPT Oper­at­ing an Exchange and Deal­ing on own account. There­fore, under the Class 2 Licence, VFA Ser­vices 1, 2, 4, 5, 6 AND 7 men­tioned above can be con­duct­ed. Of course, giv­en that this class of licence offers hold­ers the pos­si­bil­i­ty of pro­vid­ing more ser­vices, the ini­tial cap­i­tal require­ment is high­er than the Class 1 Licence. In this case, the ini­tial cap­i­tal require­ment of a Class 2 Licence will be €125,000, and the applic­a­ble super­vi­so­ry fee will be €9,000 for rev­enue up to €250,000 plus €800 per €250,000 rev­enue tranche there­after.

Should one wish to offer ANY VFA Ser­vice EXCEPT oper­at­ing a VFA Exchange, then one would need to apply for a Class 3 Licence, which would oblige hold­ers to hold an ini­tial cap­i­tal require­ment of €730,000. Of course, the manda­to­ry super­vi­so­ry fee in this case would be €12,000 for rev­enue up to €250,000 plus €800 for every rev­enue tranche of €250,000 there­after.

Last and most def­i­nite­ly not least, comes the Class 4 Licence, which lo and behold, allows providers to offer ANY of the VFA Ser­vices list­ed above! Before rush­ing to apply for this licence, one must keep in mind that an ini­tial cap­i­tal require­ment of €730,000 applies, and the super­vi­so­ry fee is €50,000 for rev­enue up to €1,000,000 plus €5000 per rev­enue tranche of €1,000,000 there­after.

Conclusion

It’s all very sim­ple, right? One word of advice: do not let the super­vi­so­ry fees scare you off! Just think what reg­u­la­to­ry endorse­ment and approval does for one’s rep­u­ta­tion! One can see it as a cer­ti­fi­ca­tion of qual­i­ty that can be used to put clients’ minds at rest and entice them to use the ser­vices of your first-class reg­u­lat­ed firm instead of those ser­vice offered by the pesky, dodgy, unreg­u­lat­ed com­pe­ti­tion.

About Malcom Wallbank

Mr. Mal­colm Wall­bank, born on 12.04.1991, read for a Bach­e­lor of Com­merce (Hon­ours) degree at the Uni­ver­si­ty of Mal­ta, spe­cial­is­ing in Bank­ing and Finance and Man­age­ment, and grad­u­at­ed with Sec­ond Class Upper Degree in 2013. In the fol­low­ing year, he grad­u­at­ed with Dis­tinc­tion in M.Sc. Finance from the Uni­ver­si­ty of Strath­clyde, Scot­land.

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