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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.

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Author of the post

Philipp M. Sauerborn

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