ICO in Malta? 3 Legislative Initiatives You Should Know About

Many start-ups are con­sid­er­ing the ques­tion of whether they should car­ry out an ICO. Besides loca­tions such as Switzer­land and Liecht­en­stein, the option of an ICO in Mal­ta is increas­ing­ly being dis­cussed. That’s lit­tle sur­pris­ing, giv­en that Mal­ta is not only an inter­na­tion­al­ly renowned finan­cial cen­tre, but has also become known as the “Blockchain Island” thanks to its tech­nol­o­gy-friend­ly reg­u­la­tion. The Mal­tese par­lia­ment is cur­rent­ly work­ing on the adop­tion of 3 impor­tant leg­isla­tive ini­tia­tives that could make Mal­ta the world’s first address for ICOs.

These are the Vir­tu­al Finan­cial Assets (VFA) Act, the Mal­ta Dig­i­tal Inno­va­tion Author­i­ty Act and the Inno­v­a­tive Tech­nol­o­gy Arrange­ments and Ser­vices (ITASA) Act.

Content and objectives of the legislative initiatives

The so-called Vir­tu­al Finan­cial Assets (VFA) Act receives par­tic­u­lar atten­tion. This Act con­tains the pro­vi­sions that will be applic­a­ble to the legal autho­ri­sa­tion and reg­u­la­tion of Ini­tial Coin Offer­ings (ICO) and Cryp­to Cur­ren­cy Exchanges in and from Mal­ta. 4 types of licences are defined which can be applied for by inter­est­ed com­pa­nies.

These 4 licens­es (VFAA Class 1 — Class 4) dif­fer in the scope of the autho­ri­sa­tions and the amount of the one-time appli­ca­tion fee as well as an annu­al super­vi­sion fee. The act fur­ther spec­i­fies what infor­ma­tion a white paper must con­tain and what require­ments must be met for it to be approved and pub­lished. Terms such as vir­tu­al finan­cial assets, smart con­tracts or VFA agents are also defined, with the lat­ter refer­ring to attor­neys reg­is­tered with the MFSA who may accom­pa­ny an ICO.

The Mal­ta Dig­i­tal Inno­va­tion Author­i­ty Act con­tains all the nec­es­sary legal pro­vi­sions to estab­lish the Mal­ta Dig­i­tal Inno­va­tion Author­i­ty (MDIA), abbre­vi­at­ed as the MDIA. The Mal­ta Dig­i­tal Inno­va­tion Author­i­ty will act as the reg­u­la­to­ry author­i­ty for the indus­try and will be head­ed by a Board of Gov­er­nors.  The aim is to cre­ate bind­ing and appro­pri­ate rules that pro­mote and sup­port the estab­lish­ment of the blockchain scene in Mal­ta with­out cre­at­ing unnec­es­sary obsta­cles to the efforts and poten­tial of the scene’s start-ups.

The Inno­v­a­tive Tech­nol­o­gy Arrange­ments and Ser­vices (ITASA) Bill details require­ments and pro­ce­dures for reg­is­ter­ing and cer­ti­fy­ing tech­nol­o­gy ven­dors and tech­nol­o­gy arrange­ments in Mal­ta. The lat­ter may also include soft­ware and archi­tec­ture based on DLT tech­nol­o­gy or smart con­tracts as well as Decen­tral­ized Autonomous Organ­i­sa­tions (DAOs). How­ev­er, the pro­pos­al focus­es in par­tic­u­lar on the area of cryp­to cur­ren­cy exchanges. The aim of this leg­isla­tive pro­pos­al is to make Mal­ta the first choice as a loca­tion for such exchanges (as has already been achieved with Binance and OKEx).

How Companies Can Benefit From These Legislative initiatives

Com­pa­nies can ben­e­fit from the leg­isla­tive ini­tia­tives adopt­ed in many ways. First of all, the clear legal frame­work gives com­pa­nies cer­tain­ty as to how and whether their token mod­el is cov­ered by legal reg­u­la­tions. The VFAA also defines when and which type of token is involved. A pure util­i­ty token is com­plete­ly exempt from the reg­u­la­tions. A secu­ri­ty token, on the oth­er hand, entails cer­tain infor­ma­tion require­ments. Through the new­ly estab­lished MDIA, the DLT mod­el of the com­pa­ny can be approved and poten­tial investors can thus present a cer­tifi­cate from the reg­u­la­to­ry author­i­ty of an EU coun­try.

A fur­ther ben­e­fit is the rep­u­ta­tion that Mal­ta is build­ing with this frame­work as a tech­nol­o­gy-friend­ly and trust­wor­thy ICO loca­tion. Trust that will help com­pa­nies to obtain the nec­es­sary sup­port from investors and banks. Added to this are the estab­lish­ment in an EU mem­ber state, which allows a per­fect mar­ket entry into the Euro­pean Union, favourable tax rates and the gen­er­al tech­nol­o­gy-friend­ly atti­tude of the MFSA towards block-chain tech­nol­o­gy and the imple­men­ta­tion of an ICO in Mal­ta.

What is the chronological order of the legislative initiatives?

How­ev­er, it is impor­tant to note that the VFAA is cur­rent­ly (as of mid-Sep­tem­ber 2018) not yet in force. The three draft laws were sub­mit­ted to the Mal­tese par­lia­ment on 26/06/2018 and unan­i­mous­ly adopt­ed, and the three leg­isla­tive ini­tia­tives were final­ly passed into law on 4 July. As the Mal­tese par­lia­ment stressed in a press release dat­ed 20.07.2018, the approved VFAA will only enter into force at a lat­er date after some detail work.  Even though no fixed date has yet been set, we strong­ly assume that this will be the case in Octo­ber of this year.

First, feed­back from the stake­hold­ers con­cerned is to be incor­po­rat­ed. For this pur­pose, the MFSA pub­lished two rule­books on sub-top­ics of the Act in July, on which inter­est­ed par­ties were able to sub­mit ideas and con­cerns. The MFSA will now draw up sup­ple­men­tary pro­vi­sions for the VFAA tak­ing these ideas into account. With its pub­li­ca­tion in the Gov­ern­ment Gazette, the VFAA will final­ly enter into force in Mal­ta.

Why Malta is positioning itself as a pioneer for DLT

Mal­ta has rec­og­nized the inno­v­a­tive and dis­rup­tive poten­tial of blockchain tech­nol­o­gy and set the course to become a glob­al blockchain hub. In fact, the world’s first offi­cial­ly leg­is­lat­ed frame­work for DLT tech­nol­o­gy has been adopt­ed. As a pio­neer, the gov­ern­ment cre­ates secu­ri­ty in an inno­v­a­tive area that has been char­ac­ter­ized by legal uncer­tain­ty up to now. Con­trary to the frame­works of Switzer­land or Liecht­en­stein, which focused pri­mar­i­ly on the clas­si­fi­ca­tion of tokens and the asso­ci­at­ed legal impli­ca­tions, Mal­ta has act­ed accord­ing to the “tech­nol­o­gy first” prin­ci­ple and cre­at­ed a frame­work that offers suf­fi­cient flex­i­bil­i­ty for the vari­ety of future appli­ca­tions of DLT.

The moti­va­tion is clear: they want to cre­ate new jobs and ben­e­fit from tax rev­enues from this promis­ing indus­try. Inno­v­a­tive start-ups from all over the world are to be attract­ed by the tech­nol­o­gy-friend­ly reg­u­la­tions and set­tle on the sun­ny Mediter­ranean island. This is good busi­ness — for the busi­ness loca­tion Mal­ta as well as for the com­pa­nies that will set­tle here.

Why Malta is THE place for an ICO

The legal frame­work seals Mal­ta’s posi­tion as an opti­mal ICO loca­tion. Behind this is an inno­v­a­tive and tech­nol­o­gy-friend­ly reg­u­la­to­ry author­i­ty that is par­tic­u­lar­ly inter­est­ed in the tech­no­log­i­cal details of the DLT mod­el men­tioned in the white paper. Start-ups can have their whitepa­per approved and their DLT mod­el accred­it­ed.

Mal­ta as an EU state and mem­ber of the EURO zone is more attrac­tive and trust­wor­thy as an ICO loca­tion than choos­ing a dubi­ous off­shore loca­tion. With the offi­cial lan­guage Eng­lish and a rep­u­ta­tion as an inter­na­tion­al finan­cial loca­tion, there is a rich sup­ply of qual­i­fied work­ers here. Favourable tax rates also make Mal­ta an attrac­tive ICO loca­tion for start-ups from all over the world. In addi­tion to the sig­nif­i­cant­ly low­er cor­po­rate income tax com­pared to Ger­many, this also includes ICO-friend­ly reg­u­la­tions. Thus it is pos­si­ble with a well thought-out arrange­ment that no tax­es are levied on cap­i­tal raised from ICOs.

If you are also inter­est­ed in hold­ing an ICO in Mal­ta, we will be hap­py to advise you. Learn more about our con­crete ser­vices and con­sult­ing in the area of blockchain and ICO.


About Dr. Jörg Werner

Dr. jur. Jörg Wern­er, born 27 May 1971, attend­ed the law school of the Uni­ver­si­ty of Leipzig and passed his first state exam­i­na­tion in the State of Sax­ony in 1996. After suc­cess­ful­ly com­plet­ing his manda­to­ry legal intern­ship, he suc­cess­ful­ly passed the sec­ond state exam­i­na­tion of the State of Sax­ony-Anhalt in 1998 and was admit­ted to the bar and began to prac­tice as a Ger­man attor­ney (Recht­san­walt) before the court of Magde­burg the same year. He worked as an attor­ney at the Law Offices of Prof. Dr. Fre­und & Kol­le­gen until he formed the firm of Wrede & Wern­er. He was also admit­ted to prac­tice before the Supe­ri­or Court of Naum­burg. In 2001, he moved the firm’s offices to Cen­tral Berlin, where he was admit­ted to prac­tice before the Courts of Berlin. Dr. jur. Jörg Wern­er then com­plet­ed his doc­tor­al stud­ies at the Uni­ver­si­ty of Ham­burg and grad­u­at­ed as a Dok­tor der Rechtswis­senschaften (Doc­tor of Laws).

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