Virtual Financial Asset (VFA) Licences in Malta

Under the Vir­tu­al Finan­cial Assets Act (VFAA), Mal­ta intro­duced 4 types of licens­es for com­pa­nies wish­ing to pro­vide ser­vices relat­ed to vir­tu­al finan­cial assets. The 4 licens­es — VFAA Class 1 to Class 4 — com­prise var­i­ous types of rights and require dif­fer­ent lev­els of invest­ment.

In this arti­cle, you’ll learn what per­mis­sions these licens­es cov­er, who they are for, and what invest­ments you need to expect. You’ll also learn why and how these licens­es can ben­e­fit you as a com­pa­ny.

Mod­el of 4 licens­es — appli­ca­tion and super­vi­so­ry fee

First, a few details on the gen­er­al struc­ture of the 4 licens­es that allow their own­ers (depend­ing on the license) to offer cer­tain ser­vices relat­ed to VFAs and to present their DLT (Dis­trib­uted Ledger Tech­nol­o­gy) mod­el as accred­it­ed by the Mal­tese super­vi­so­ry author­i­ty. How­ev­er, these licences are not applic­a­ble and valid for VFA agents.

Licens­es are grant­ed by the Mal­ta Finan­cial Ser­vices Author­i­ty (MFSA), which takes the time to learn and review the details of the DLT mod­els from appli­cants. A one-time appli­ca­tion fee is payable upon appli­ca­tion. In addi­tion, each license is sub­ject to an annu­al super­vi­so­ry fee, which may increase in line with the annu­al turnover.

VFAA Class 1 – Simple consulting and placement of VFAs

The VFAA Class 1 license enti­tles its hold­ers to receive and trans­mit orders relat­ing to vir­tu­al finan­cial assets and to offer invest­ment advice relat­ing to or place vir­tu­al finan­cial assets. A one-time appli­ca­tion fee of €3,000 is due. The annu­al super­vi­so­ry fee starts at €2,750 for a turnover of up to €50,000. In addi­tion, for each tranche of €50,000 in turnover (up to a max­i­mum amount of €1,000,000), €350 is due. This licence is there­fore par­tic­u­lar­ly suit­able for inter­me­di­aries or ser­vice providers offer­ing invest­ment advice for cryp­to invest­ments.

VFAA Class 2 – VFA services without authorization to trade on one’s own account

The VFAA Class 2 licence enti­tles com­pa­nies to pro­vide any VFA ser­vice and to hold or con­trol cus­tomers’ mon­ey, but not to oper­ate a VFA exchange or trade on their own account. The one-time appli­ca­tion fee is €5,000, for a turnover of up to €250,000 there is an annu­al super­vi­so­ry fee of €4,500. The lat­ter increas­es by a fur­ther €400 for each tranche of €250,000 (up to a max­i­mum of €5,000,000) exceed­ing this amount. This license is there­fore pri­mar­i­ly suit­able for wal­let providers, P2P exchanges with so-called “hot wal­lets” and ser­vice providers offer­ing port­fo­lio man­age­ment of cryp­to invest­ments.

VFAA Class 3 – Licence for any type of VFA service but a VFA exchange

This licence autho­ris­es its hold­ers to pro­vide any VFA ser­vice and to hold or con­trol cus­tomers’ mon­ey, but not to oper­ate a VFA exchange.

For this type of licence, the appli­ca­tion fee is €7,000 and the super­vi­so­ry fee for an annu­al turnover of up to €250,000 is €6,000. For each addi­tion­al turnover tranche of €250,000 (capped at €50,000,000), the super­vi­so­ry fee increas­es by €400. Due to the grant­ed rights, we pri­mar­i­ly see this license as the right choice for OTC traders and mar­ket mak­ers.

VFAA Class 4 – The Licence for VFA Exchanges

The most com­pre­hen­sive licence, VFAA Class 4, enti­tles com­pa­nies to oper­ate a VFA Exchange and to hold or con­trol cus­tomers’ mon­ey, vir­tu­al finan­cial assets and/or pri­vate cryp­to­graph­ic keys and cus­to­di­an or nom­i­na­tion ser­vices only in con­nec­tion with the oper­a­tion and activ­i­ties of that VFA Exchange.

The VFAA Class 4 license requires an appli­ca­tion fee of 12.000€. In addi­tion, an annu­al super­vi­so­ry fee of €25,000 is charged for annu­al sales of up to €1,000,000. With a cap of € 100,000,000, an addi­tion­al € 2,500 in super­vi­so­ry fee per year is due for each addi­tion­al € 1,000,000 in annu­al turnover.

As the most com­pre­hen­sive license, the VFAA Class 4 is explic­it­ly intend­ed for all cryp­to cur­ren­cy exchanges. The Mal­tese gov­ern­ment pre­sum­ably intend­ed to use this license to get involved in the attrac­tive future busi­ness of these exchanges. This has already con­vinced the indus­try giants Binance and OkEx to set­tle here.

Which companies need a licence

So far, so good. But per­haps you are still won­der­ing why you should apply for such a license and pay the nec­es­sary fees? The main rea­son we see is the addi­tion­al trust such a licens­ing can cre­ate when it comes to secur­ing invest­ments and sup­port for your com­pa­ny. Instead of mov­ing to a dubi­ous off­shore loca­tion, you can prof­it from the trust investors place in the inter­na­tion­al finan­cial cen­tre and “Blockchain Island” Mal­ta.

Decide to get a VFA license in Mal­ta and ben­e­fit from the world’s first legal frame­work on DLT tech­nol­o­gy. Checks con­duct­ed by the MFSA can fur­ther help you to poten­tial­ly dis­cov­er and eval­u­ate new and impor­tant aspects about your DLT mod­el you haven’t pre­vi­ous­ly con­sid­ered. We rec­om­mend any DLT-relat­ed com­pa­ny that wants to offer its ser­vices in the EU to apply for a VFA license in Mal­ta.

Support in licence application process through Registered VFA Agent

A reg­is­tered VFA agent must be com­mis­sioned to sub­mit an appli­ca­tion for licens­ing. This agent must also endorse the appli­ca­tion. No false hopes should be raised here. The appli­ca­tion process for a licence is long and hard. And expen­sive. There are no short­cuts. Nev­er­the­less, the assis­tance of a reg­is­tered VFA agent can be a sig­nif­i­cant sup­port and facil­i­ta­tion in this process.

Time and resources that VFA ser­vice providers could invest bet­ter and more effi­cient­ly in oth­er areas. As an expe­ri­enced law firm in Mal­ta and a reg­is­tered VFA agent, Dr. Wern­er & Part­ner will be pleased to assist you in this process.

Pro­ce­dure for and dura­tion of the award­ing of the licence

As the VFAA is cur­rent­ly not yet in force, it is impos­si­ble to say, how long exact­ly it takes to apply for the desired license and final­ly obtain it. Rather, it depends on the case, the DLT mod­el, the license applied for and the VFA ser­vices to be offered.

Since a wealth of infor­ma­tion and doc­u­ments are required for the appli­ca­tion, these doc­u­ments should ide­al­ly all be avail­able when apply­ing for the license to enable a quick award process. In addi­tion, very strict Know Your Client (KYC) guide­lines, as well as notar­i­al cer­ti­fi­ca­tions and oth­er legal require­ments must be observed. More­over, proof of cap­i­tal is also required for a license to be issued.

While these con­di­tions rep­re­sent an admin­is­tra­tive bur­den, they also ensure the rep­u­ta­tion and integri­ty of Mal­ta as a finan­cial cen­tre, which ulti­mate­ly adds val­ue to your licence.

The tech­nol­o­gy-friend­ly frame­work con­di­tions and atti­tude by the Mal­tese gov­ern­ment make us con­fi­dent that they intend to facil­i­tate a legal­ly licensed cor­po­rate activ­i­ty in the blockchain area as quick­ly as pos­si­ble.

To find out more about how we can advise and sup­port you in apply­ing for a VFAA licence in Mal­ta, click here. Make an appoint­ment now and secure your DLT mod­el license issued in the EU coun­try Mal­ta.

About Philipp Sauerborn

In 2005, Philipp Sauer­born joined the firm of St. Matthew in Lon­don, one of the lead­ing Ger­man account­ing firms in Eng­land renowned for its exper­tise in cor­po­rate, com­mer­cial and tax law, as a depart­ment head. After three years, he was a part­ner and man­ag­ing direc­tor.
Towards the end of 2011, he decid­ed to move to Mal­ta, where he first worked at inter­na­tion­al law firms and con­sul­tan­cies in an employed and con­sult­ing capac­i­ty. Since the begin­ning of 2013, he has been a senior employ­ee at Dr. Wern­er & Part­ner. Mr. Sauer­born is cur­rent­ly com­plet­ing his ADIT ‑Advanced Diplo­ma in Inter­na­tion­al Tax.

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