10 Mar 2021
The Malta Financial Services Authority (‘MFSA’) and the Malta Digital Innovation Authority (‘MDIA’) have jointly issued a consultation document aimed at obtaining industry feedback in relation to the proposed adoption of an Innovative Technology Arrangement (‘ITA’) certification. This new requirement might affect applicants seeking a Virtual Financial Assets (‘VFA’) service licence and those already holding a licence here in Malta.
The consultation document brings forth the consideration that Distributed Ledger Technology (‘DLT’) is often viewed as a system that brings with it increased technological risks. Therefore, this document proposes to implement and put into practice a system audit-based ITA certification, which would be entrusted to the MDIA. This proposed addition is intended to provide an extra layer of security and regulatory certainty when dealing with DLTs.
Where a VFA license holder does not utilize ITAs, it is to seek MDIA ruling confirming this, and such a decision will constitute sufficient evidence for the MFSA. Those applicants still in the process of obtaining a VFA licence are to either present the MFSA a ruling by the MDIA showing that they do not have an ITA in place, or if it is the case that the applicant has an ITA as part of its operations, the entity will be required to submit a Systems Audit Report. The timeframe for both such decisions is of 3 months from obtaining the licence.
Should this consultation document gain effect, it will be transposed into Chapter 3 of the VFA Rulebook and become immediately applicable. Since this ITA certification would be a new requirement imposed on Licence Holders their fees would be waived for the first two years.
In case the MDIA certification becomes an essential part of the VFA licencing conditions, a failure to obtain such certification will result in the licence either not being granted or, if the entity already has a license, the MFSA may require such Licence Holders to terminate its operations.
The consultation period is open until 30 March 2021. Access to the above-mentioned consultation document is available here. Those interested in submitting their feedback are encouraged to do so via VFA@mfsa.mt. We will continue to monitor the results emanating from this consultation document and keep our readers updated accordingly.
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Authors: Joseph F. Borg, Galyna Podoprikhina, Jessica Napier