The Malta Financial Services Authority (“MFSA”) has launched a consultation document publishing a draft rulebook in order to introduce further rules in relation to Malta Professional Investor Funds investing in virtual currencies. Accordingly, the MFSA is inviting relevant stakeholders to provide comments and feedback in this process. This is a very positive step towards investments in virtual currencies which is in line with the Government’s policy to develop a digital economy in Malta.
MFSA launched draft rulebook for Malta Professional Investor Funds investing in virtual currencies
The MFSA advised that for the time being the proposed framework only aims to regulate Malta Professional Investor Funds with the primary objective of investing in virtual currencies. Moreover, the legal structures for Malta Professional Investor Funds investing in virtual currencies should only be limited to investment companies with fixed share capital (INVCOs) and investment companies with variable share capital (SICAVs). However, the MFSA is also reviewing whether Alternative Investment Funds and Notified Alternative Investment Funds should be allowed to invest in virtual currencies.
The new rulebook published for consultation is an extension to the existing rules related to Malta Professional Investor Funds. In fact, it presents additional rules with the aim to mitigate the potential and emerging risks of investments linked to virtual currencies. Furthermore, the core suggestions presented within this new rulebook aim at protecting the interest of investors and the integrity of the local financial services industry in the context of virtual currencies.
The new rulebook proposes a number of specific requirements on the governing bodies and the service providers of Malta Professional Investor Funds. Some of the main requirements which were introduced are related to: competence, risk warnings, quality assessment, risk management and valuation. With respect to competency requirements, the MFSA is proposing that the governing body of a Malta Professional Investor Fund shall, at all times, has at least one member who has sufficient knowledge and experience in the field of information technology, virtual currencies and their underlying technologies, including but not limited to blockchain technology. On the other hand, the appointed service providers of a PIF (which include the Investment Manager, Administrator, Custodian or Prime Broker, Compliance Officer, MLRO, and Auditor) shall have the business organisation, systems, experience and expertise deemed necessary by the MFSA for them to act as service providers to a Malta Professional Investor Fund investing directly or indirectly in virtual currencies.
The proposals presented by the MFSA in the new rulebook are not binding and are subject to further changes and improvements following receipt of feedback from the industry. In this regard, the MFSA has invited stakeholders to submit any additional changes/improvements to the rulebook by 10th November 2017. A copy of the proposed rulebook can be downloaded here.
Our Fintech Practice
Our lawyers and financial services specialists at Chetcuti Cauchi Advocates welcome the innovations which the financial services sector is currently and seek to provide bespoke solutions to our clients by fusing together traditional legal notions with new technologies. Led by Senior and co-founding Partner Dr Maria Chetcuti Cauchi, our Fintech practice strives to assist clients in this burgeoning and evolving sector of law which shall reshape the financial services sector as we know it.
Malta Professional Investor Funds Investing in Virtual Currencies
Proposed Rulebook for Investments in Virtual Currencies
The Malta Financial Services Authority (“MFSA”) has launched a consultation document publishing a draft rulebook in order to introduce further rules in relation to Malta Professional Investor Funds investing in virtual currencies. Accordingly, the MFSA is inviting relevant stakeholders to provide comments and feedback in this process. This is a very positive step towards investments in virtual currencies which is in line with the Government’s policy to develop a digital economy in Malta.
The MFSA advised that for the time being the proposed framework only aims to regulate Malta Professional Investor Funds with the primary objective of investing in virtual currencies. Moreover, the legal structures for Malta Professional Investor Funds investing in virtual currencies should only be limited to investment companies with fixed share capital (INVCOs) and investment companies with variable share capital (SICAVs). However, the MFSA is also reviewing whether Alternative Investment Funds and Notified Alternative Investment Funds should be allowed to invest in virtual currencies.
The new rulebook published for consultation is an extension to the existing rules related to Malta Professional Investor Funds. In fact, it presents additional rules with the aim to mitigate the potential and emerging risks of investments linked to virtual currencies. Furthermore, the core suggestions presented within this new rulebook aim at protecting the interest of investors and the integrity of the local financial services industry in the context of virtual currencies.
The new rulebook proposes a number of specific requirements on the governing bodies and the service providers of Malta Professional Investor Funds. Some of the main requirements which were introduced are related to: competence, risk warnings, quality assessment, risk management and valuation. With respect to competency requirements, the MFSA is proposing that the governing body of a Malta Professional Investor Fund shall, at all times, has at least one member who has sufficient knowledge and experience in the field of information technology, virtual currencies and their underlying technologies, including but not limited to blockchain technology. On the other hand, the appointed service providers of a PIF (which include the Investment Manager, Administrator, Custodian or Prime Broker, Compliance Officer, MLRO, and Auditor) shall have the business organisation, systems, experience and expertise deemed necessary by the MFSA for them to act as service providers to a Malta Professional Investor Fund investing directly or indirectly in virtual currencies.
The proposals presented by the MFSA in the new rulebook are not binding and are subject to further changes and improvements following receipt of feedback from the industry. In this regard, the MFSA has invited stakeholders to submit any additional changes/improvements to the rulebook by 10th November 2017. A copy of the proposed rulebook can be downloaded here.