A Hopefully Helpful guideline to help potential clients assess the feasibility and progress of applying for the VFA license in Malta.

Photo by Martin Widenka on Unsplash


Malta — The Blockchain Island

While Malta may known as THE blockchain island, make no mistake — their reception towards people who don’t play by the rules can be exceptionally chilly.

With a law (we’ll get to that in a moment) that was designed to provide a regulatory framework for cryptocurrencies, ICOs, crypto exchanges and other virtual financial assets, Malta expects strict compliance to those who wish to develop their blockchain businesses on their turf.

This law is known as the Virtual Financial Asset Act (VFAA), and according to the Malta Financial Services Authority (MFSA), the following activities are regulated by the Act if conducted in or from within Malta:

  1. Public Virtual Financial Asset (VFA) offering
  2. Application for a VFA’s admission to trading on a Distributed Ledger Technology (DLT) Exchange
  3. The activity of a VFA Agent and provision of VFA services

Therefore, if you wish to offer a VFA to the public in or from within Malta, this will fall under the VFAA. Here are the steps you will need to take if you are planning to launch an initial VFA offering in the Malta jurisdiction.


How to Launch an Initial VFA Offering



Step 1: Form a Team

If you are starting from the very beginning (i.e. one man with one great vision), it’s time to form your army. The team should consist of the following:

  1. Two directors in satisfaction of the ‘dual control’ principle
  2. A Board of Administration that consists of:

A Systems Auditor

An Auditor

A Money Laundering Reporting Officer (MLRO)

A Custodian for the safekeeping of assets and investors’ funds

And most importantly, a VFA Agent

Bear in mind that, according to the VFAA, this team should comprise members of good repute and ‘possess sufficient collective knowledge, skills and experience and commit sufficient time to perform their duties and be able to understand the license holder’s activities, including the main risks.’

This board of administration should also be present to sign the whitepaper and include a statement in the whitepaper that states that the whitepaper complies with the requirements under the Act.


Step 2: Produce a Whitepaper

Prepare a whitepaper that is compliant with respective applicable laws. Guidelines are listed in the first schedule of the Act, and include guidelines for website and other advertisement materials.


Step 3: Have a Physical Office in Malta

Your VFA agent should be aware of the requirements of the requirements, and one of them include having an office in Malta.


Step 4: Moderate Whitepaper and Undertake Financial Test

Get your appointed VFA agent to moderate the contents of your whitepaper. This agent will be able to guide you on the requirements set by the MFSA and makes sure that the white paper is robust and compliant before he sends the document to the MFSA for approval. This agent will also be responsible for carrying out the Financial Instrument Test, a test developed by MFSA to determine if the asset you are offering is legally deemed as a virtual token (VT), electronic money, a financial instrument or a virtual financial asset. This test must be undertaken before taking further action with the competent authority, Malta Financial Services Authority (MSFA), because the agent will determine the route of the company based on the results.

According to the FAQ page,

1. Should a DLT asset be determined by the Test to be a VT, any activity performed in relation thereto would remain unregulated.

2. Should a DLT asset be determined by the Test to be a financial instrument or electronic money, the respective framework would apply. For example, DLT assets which qualify as financial instruments can only be traded on trading venues falling within scope of Markets in Financial Instruments Directive (MiFID), a law that regulates all investment services in member states of the European Economic Area.

3. Should a DLT asset not be determined by the Test as (i) a VT, (ii) a financial instrument or (iii) electronic money, such DLT asset would qualify as a VFA. The Act and the VFA Framework would therefore apply.

Only after the VFA agent ensures that the white paper is in compliance with the requirements of the VFA Act as published by the MFSA, and has determined the type of DLT asset via the Financial Instrument Test, can the agent then proceed with step 5.


Step 5: Submit Whitepaper

Appointed VFA agent will submit your whitepaper to competent authority. Applications can only be made through a VFA agent. Therefore, a VFA agent is crucial.


Step 6: Wait

Wait for competent authority to register the whitepaper.


Step 7: Congratulations!

You can now launch your public VFA Offering in Malta! You will now need to appoint an auditor to report important developments to the MFSA. You should commence the public VFA offering or proceed with the admission of your VFA to trading on a DLT exchange within six months from the date of registration of the whitepaper with the MFSA.


Other Questions

Who is the competent authority?

The competent authority refers to the Malta Financial Services Authority, established by the Malta Financial Services Authority act. They have the power to require the issuer to include relevant information in whitepapers, websites, advertisements etc for investor protection, approve of an issuer’s whitepaper, suspend or prohibit initial VFA offerings, and even make public the fact that an issuer is failing to comply.


What does the VFA agent do?

These agents not only ensure that your whitepaper is compliant, but also assist you in performing the Financial Instrument Test. When your ICO has been approved by the MFSA, the agent will make sure that a compliance report is received by the MFSA every year.


Where can I contact a VFA agent?

The competent authority has established a list of registered VFA agents, and will continue updating the list regularly. These VFA agents possess a valid license granted by the competent authority. Note that the VFA agent cannot be an employee nor have a direct interest in the company applying for license.

You should be able to view the list on the MFSA website here.


What is the Financial Instrument Test?

It is a test that MFSA uses to establish what type of DLT asset a company is offering. The test is applicable to people who wish to offer DLT assets to the public.

The aforementioned information can be found from the Virtual Financial Assets Rulebook under Chapter 2, Virtual Financial Assets Rules for Issuers of Virtual Financial Assets. You can refer to the links provided for a comprehensive guideline.


All the best,

Cheryl Lim