Law and Financial Markets Review

ISSN: 1752-1440 (Print) 1752-1459 (Online) Journal homepage: https://www.tandfonline.com/loi/rlfm20

A critical examination of the VFA framework – the

VFA agent and beyond

Christopher P. Buttigieg & Gerd Sapiano

To cite this article: Christopher P. Buttigieg & Gerd Sapiano (2019): A critical examination
of the VFA framework – the VFA agent and beyond, Law and Financial Markets Review, DOI:
10.1080/17521440.2019.1640421

To link to this article: https://doi.org/10.1080/17521440.2019.1640421

Published online: 12 Jul 2019.

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 Law and Financial Markets Review, 2019
https://doi.org/10.1080/17521440.2019.1640421

A critical examination of the VFA framework – the VFA

agent and beyond

CHRISTOPHER P. BUTTIGIEG and GERD SAPIANO

Malta Financial Services Authority, University of Malta, Malta

Malta is one of the first countries to have enacted a framework for the regulation of crypto assets. This paper
examines the Maltese initiative and compares this framework with developments in other jurisdictions,
particularly France, which is the only EU Member State other than Malta, to have a sui generis framework for
the sector. It also examines in detail the regime applicable to VFA Agents, which have a critical role in
ensuring that only operators that are fit and proper get access to Malta’s financial system, thus acting as a first
line of defence against the abuse of the system. The paper outlines how, through checks on an applicant for
registration as a VFA Agent’s governance, business model, level of competence and systems and controls, the
MFSA is ensuring that registered agents can perform as the Authority’s extended supervisory arm, thereby
strengthening the level of monitoring in this field.

1. Introduction At present, there are over two thousand crypto-assets in

The crypto-asset1 sector and the introduction of a regulatory
framework to ensure proper market integrity and investor
protection in this field, is a topic which is being debated
across jurisdictions and at supranational level. Malta is one
of the first countries to have enacted a framework for the
regulation of this new sector. This paper examines the
Maltese initiative and compares this framework with develop-
ments in other jurisdictions, particularly France, which is the
only Member State other than Malta, to have a sui generis fra-
mework for the sector. It also examines in detail the regime
applicable to VFA Agents that have an important role to
ensure proper market integrity in this field.
The Maltese Government’s policy decision to establish a
new pillar for the Maltese economy based on Distributed
Ledger Technology (“DLT”) has led to Malta being termed
“the Blockchain Island”.2 This has generated interest from sta-
keholders, with a wide range of players having announced
plans to operate in or from the island.
The Malta Financial Services Authority, the single regula-
tor for financial services in Malta,3 identified potential risks
and a number of disadvantages in having such a fast develop-
ing sector operating in a regulatory vacuum, and it was in this
context that the MFSA’s Board of Governors decided that the
crypto-asset sector should be regulated in Malta.4
Following a public consultation process,5 and the positive
feedback received thereto, the MFSA started to develop a
standalone regulatory framework6 which treats crypto-assets
as a separate investment asset class. In this respect, the regulat-
ory framework devised by the MFSA seeks to protect inves-
tors, ensure market integrity and safeguard financial
soundness,7 whilst at the same time proposing regulation
which does not stifle innovation.
existence world-wide,8 each having different characteristics.
In this light, any attempt to regulate the crypto-asset space,
inevitably raises the question of how something, which is
global and decentralised, can be controlled. The approach
taken by the Maltese legislator was not to regulate crypto-
assets per se, but rather the persons issuing such assets and, or
providing services in relation thereto in or from within
Malta. The resultant Virtual Financial Assets Act (“VFA Act”
or “the Act”) provides a regulatory framework in respect of
[a] the offer of virtual financial assets to the public and the
admission of virtual financial assets to trading on a DLT
Exchange, and [b] persons providing services9 in relation to
virtual financial assets as well as a new functionary termed the
VFA Agent.10 It is acknowledged that the classification of a par-
ticular DLT asset as a Virtual Financial Asset (“VFA”) or other-
wise may not always be straight forward; however the
Authority has devised a Financial Instrument Test11 (“the
Test” or “FIT”) with aim of achieving regulatory certainty in
this regard.
This paper seeks to complement existing literature which is
available vis-à-vis the crypto-asset sector,12 by critically exam-
ining the role of the VFA Agent as originally conceived when
the framework for crypto-assets was being designed in Malta
and its subsequent implementation under the VFA Act. It also
has the purpose of supplementing the points made in a paper
by Buttigieg and Efthymiopoulos13 on the regulatory frame-
work for crypto-assets in Malta and the international develop-
ments in this field. This will also include a brief comparative
analysis between the Maltese and French regimes.
Prepared after research and analysis of a number of publi-
cations, the paper also draws from the authors’ professional
experience, particularly in relation to the drafting and sub-
sequent implementation of the VFA framework as well as

© 2019 Informa UK Limited, trading as Taylor & Francis Group

2 C. P. Buttigieg and G. Sapiano
meetings attended in local and international fora. The authors
have also sought the views of experts in the field in order to
obtain further insights from different perspectives.14
The central argument of this paper is that the VFA Agent
has a critical role in ensuring that only operators that are fit and
proper get access to Malta’s financial system, thus acting as a
first line of defence for the crypto-asset sector in Malta. The
paper outlines how, through checks on an applicant for regis-
tration as a VFA Agent’s governance, business model, level of
competence and systems and controls, the MFSA is ensuring
that registered agents are able to perform as the Authority’s
extended supervisory arm, thereby strengthening the level
of monitoring in this field. This will in turn enhance market
integrity and financial soundness and provide additional safe-
guards for investors.
Apart from this introductory section and a conclusion, this
paper is composed of three parts which respectively provide:
[i] an overview of the Maltese initiative towards the regulation
of crypto-assets and a brief overview of the international
dimension thereof, demonstrating that there are distinct
approaches being taken; [ii] the rationale for the VFA Agent
within the context of the VFA framework; and [iii] the
main regulatory requirements applicable to VFA Agents.
2. The regulatory framework for crypto-assets
from a national and international perspective
At present there is no harmonised or common regulatory
approach vis-à-vis the crypto-asset sphere – both globally
and at European level. Various international organisations
such as the International Monetary Fund (“IMF”), the Finan-
cial Stability Board (“FSB”), the International Organisation of
Securities Commissions (“IOSCO”), and the Financial Action
Task Force (“FATF”) have prepared reports or expressed
opinions on crypto-assets and whether these should be regu-
lated, but none, with the exception of the FATF, have so far
issued standards for the regulation of this field.
In a report issued in October 2018, the Financial Stability
Board stated that while crypto-assets pose potential risks to
financial stability, these risks are not currently of significant
concern, unless the use of these types of assets becomes more
widespread. Indeed, the FSB has so far not considered the
topic of sufficient importance to merit further regulatory
work, stating that a “forward-looking approach in monitoring
crypto-assets can help provide a basis for identifying potential
gaps and areas that should be prioritised or focused on.”15 Simi-
larly, the European Central Bank (“ECB”) states that crypto-
assets do not pose an immediate threat to the financial stability
of the euro area, that the risks are manageable and that the
“sector requires continuous careful monitoring since crypto-
assets are dynamic and linkages with the wider financial
sector may increase to more significant levels in the future”16
On the other hand, the FATF appears to have been more
proactive having provided a definition of “virtual currencies”
as far back as 2014.17 More recently, on the 22 February 2019,
the FATF issued a public statement – Mitigating risks from
Virtual Assets18 – wherein it inter alia stated that “ … countries
should consider virtual assets as ‘property,’ ‘proceeds,’ ‘funds’,
‘funds or other assets,’ or other ‘corresponding value’.
Countries should apply the relevant measures under the
FATF Recommendations to virtual assets and virtual asset
service providers (VASPs)”.19 Within this statement the
FATF also indicated that VASPs should: be authorised, at
least in the jurisdiction where they were created;20 and be
adequately regulated and supervised, particularly in relation
to anti money laundering and counter financing of terrorism
(“AML/CFT”) with proportionate and dissuasive sanctions
being available where such requirements are breached.21
FATF also stressed the importance of international
cooperation in this sector.22 The need for international
cooperation was also emphasised by IOSCO in the consul-
tation document, issued on 28 May 2019, whereby stake-
holders’ views with respect to issues associated with crypto-
asset trading platforms are being sought.
This section will demonstrate the discrepancies between
the different regulatory frameworks which have been pro-
mulgated to date. It will also provide an overview of the
Maltese approach to crypto-asset regulation and a brief com-
parative analysis thereof with the French regime.
2.1. Classification into a particular asset class
A crucial factor vis-à-vis the treatment of crypto-assets is their
classification into a particular asset class. At European Union
(“EU”) level, on the 13 November 2017, the European Secu-
rities and Markets Authority (“ESMA”) issued a statement on
ICOs23 highlighting that consideration must be given to
whether activities undertaken in relation to crypto-assets
qualify as regulated activities under the traditional financial
services framework. ESMA’s position may be summarised as
follows – “Where … coins or tokens qualify as financial
instruments it is likely that the firms involved … conduct
regulated investment activities.”24 It therefore follows that
assets falling under the definitions provided by the traditional
financial services sector are to be regulated thereunder whilst
those assets which do not would remain unregulated.
One may suggest that similar regulatory gaps also exist in
the United States (“US”), with the Securities and Exchange
Commission25 and Commodities Futures Trading Commis-
sion26 both having jurisdiction over crypto-assets but with
neither having sufficient jurisdiction by themselves, or even
jointly.27
As shall be explained in further detail hereunder, Malta has
sought to address such lacunae by recognising crypto-assets
which are not financial instruments as a distinct asset class
for regulatory purposes. Historically, Malta has tended to
opt for standalone regimes when regulating sectors which
were previously unregulated – in this respect one may draw
parallels with the regulation of trusts and trustees through
the enactment of the Trusts and Trustees Act28 – and this
trend has also been followed vis-à-vis the crypto-asset space
whereby Malta has promulgated a dedicated regulatory fra-
mework treating crypto-assets as an asset class for purposes
of investment. Whilst other jurisdictions such as Mauritius29
have taken an approach similar to that of Malta,30 other jur-
isdictions, such as Japan, have opted to integrate crypto-
assets into their payment services legislation,31 thus regulating
crypto-assets as a means of payment.32

2.2. Bespoke regimes for the crypto-asset sector
In its advice of the 9 January 2019, ESMA advocates an EU-
wide bespoke regime for crypto-assets which fall outside tra-
ditional financial services legislation in order to address any
present regulatory gaps.33 The European Banking Authority
(EBA), on the other hand, is more cautious in its approach
stating that a cost/benefit analysis to assess whether action at
EU level is required.34 That being stated, both ESMA and
the EBA stress the need to keep following market
developments.
Within the EU, apart from Malta, France is the only
member state that has enacted legislation for the regulation
of crypto-assets. On the 9th October 2018, the French parlia-
ment approved the PACTE Bill35 at its first reading.36 Like
the Maltese framework, it provides a legal framework for
ICOs37 and services provided in relation to crypto-assets
which do not classify as traditional investment instruments.38
This Bill, which was adopted on the 11 April 2019,39 will be
discussed in further detail in a subsequent section of this
section.
Furthermore, it is interesting to note that another Member
State, Italy, is also considering regulating crypto-assets which
are not traditional investment instruments through a bespoke
regime. Indeed, the Italian securities and markets regulator –
CONSOB – has recently published a call for evidence on
Initial Coin Offerings and Crypto-Assets Exchanges,40 inter
alia seeking views on the possible introduction of a “special
regime” therefor.41
Whilst it is evident that no two regulatory initiatives are
identical, it is equally clear that regulators are striving to
provide legal certainty in a field which was, until recently,
unregulated. In this regard, however, one cannot but
remark about the importance of having international stan-
dards on best practices in this field, which should ensure
proper regulation of the sector, not only on a national level
but also internationally. International standards are not only
important for purposes of harmonisation; but also to foster
mutual trust and understanding between financial supervisors
and to facilitate collaboration for the purpose of cross border
business. Such standards would also complement the aim of
the European Supervisory Authorities to strengthen supervi-
sory convergence.42
2.3. The Maltese approach
The Maltese initiative to regulate the crypto-asset space
started on the 30 November 2017 with the publication of a
Discussion Paper on Initial Coin Offerings, Virtual Currencies
and related Service Providers.43 The discussion paper pro-
posed the establishment of a framework whereby activity con-
ducted in relation to crypto-assets falling under traditional
financial services continues being regulated thereunder and
a new legislative framework would be proposed for crypto-
assets not caught by existent legislation – an approach consist-
ent with ESMA’s position.44
The feedback received to the consultation was positive and
the MFSA proceeded to draft a new act – the VFA Act regu-
lating: [i] VFA Agents; [ii] Initial Virtual Financial Asset Offer-
ings; and [iii] VFA Service Providers. The Act, which seeks to
Law and Financial Markets Review 3
achieve consumer protection, market integrity and financial
soundness in this new area of financial business, was approved
by parliament on the 4 July 2018,45 published on the 20 July
201846 and eventually came into force on the 1 November
2018.47 The Authority also drafted subsidiary legislation and
a rulebook which underpin and complement the VFA Act –
whilst the Act sets out the high level principles for the regu-
lation of this embryonic sector, replicating the high level prin-
ciples of EU legislation under the traditional financial services
spectrum, the subsidiary legislation48 and rules49 issued there-
under provide further detail and granularity.
This initiative sought to address the deficiency in investor
protection which prevailed in the absence of a robust regulat-
ory framework for the sector by reducing the information
asymmetries which existed between parties and mitigating
the risk of financial crime. One may easily identify a
number of requirements which were introduced to this aim,
such as the fitness and properness assessments which operators
are subject to prior to entering the financial system,50 the seg-
regation and safeguarding of clients’ assets,51 the appointment
of VFA Agents with prospective operators52 and the impo-
sition of maximum investment amounts for non-experienced
investors,53 amongst other requirements. Moreover, the
introduction of prudential requirements, in the form of
both initial and on-going capital requirements,54 aim to safe-
guard financial stability, by catering for increased transparency
requirements, replicating the high level principles of the EU
legislation on market abuse, and by virtue of the introduction
of requirements which extend beyond the EU’s fifth Anti-
Money Laundering Directive55 (“5AMLD”), the framework
also seeks to ensure market integrity.
In line with the approach taken by ESMA,56 the applica-
bility of the framework is highly dependent on the classifi-
cation of the DLT Asset in question as a VFA. This, along
with clear definitions is considered to be crucial for the
proper functioning of the framework. In this light, the VFA
Act defines a DLT Asset as: [i] a virtual token; [ii] a VFA;
[iii] electronic money; or [iv] a financial instrument.57 In
order to ensure that all DLT Assets are classified, a VFA is
then defined, by way of exclusion of other defined and well
known asset classes, as a DLT Asset which is not a virtual
token, electronic money or a financial instrument.58
In order to ensure regulatory certainty, the MFSA designed
and adopted the FIT, which provides a number of pre-deter-
mined questions in order to guide market players in arriving to
a determination as to the nature of the particular DLT asset
and, as a result, the applicable regulatory framework.
Therefore, should a DLT asset qualify as a financial instru-
ment or e-money, the issuance thereof and any services pro-
vided in relation thereto would be required to follow the
stipulations of the applicable EU legislation. DLT assets
which qualify as virtual tokens, being those DLT assets
whose utility, value or application is restricted solely to the
acquisition of goods or services, either solely within the
DLT platform on or in relation to which it was issued or
within a limited network of DLT platforms,59 are unregulated
– given that it may be argued that they pose little risk to the
financial system as they exist solely within a limited eco-
system. Finally, the offer to the public or admission to
trading of and services provided in relation to assets which
4 C. P. Buttigieg and G. Sapiano
do not classify as financial instruments, electronic money, or
virtual tokens, and therefore are classified as VFAs are regu-
lated under the VFA Act.
It is therefore reasonable to suggest that apart from ensur-
ing consumer protection, promoting market integrity, and
ensuring financial soundness, the VFA Framework seeks to
provide regulatory certainty for a sector which was previously
unregulated. This demonstrates the proactive approach being
taken in Malta, both from a policy and regulatory/supervisory
perspective.
2.4. The French approach – A brief comparative
analysis
As aforestated, the final text of the PACTE bill was recently
adopted in France, amending the Monetary and Financial
Code (Le code monétaire et financier) (“MFC”) in order to estab-
lish a sui generis regime for crypto-assets. Whilst Article 85 (L.
552-4) sets out a voluntary regime for token issuers (Émetteurs
de jetons) to apply for a visa60 from the Autorité des Marchés
Financiers (“AMF”);61 Article 86 provides a requirement for
digital asset service providers (Prestataires de services sur actifs
numériques) to register with the AMF prior to exercising
their activity.62
The MFC, as amended, requires token issuers to draw up
an information document in order to provide information to
the public on: [i] the proposed offer; [ii] the risks associated
therewith; [iii] the issuer; and as well as [iv] the information
which is to be provided to subscribers on an annual basis
with respect to the use of proceeds.63 The French regulator,
the AMF will then assess whether the proposed offer presents
the guarantees required of a public offer and, in particular
whether the issuer is a legal person established in France and
whether such issuer has put in place safeguards for the assets
raised by virtue of the offer.64 The AMF will grant a visa if
it is satisfied that these requirements have been met.65
Whilst the assessment of the information document is
similar to that of a whitepaper under the Maltese framework,
the fact that obtaining a visa under the MFC is voluntary dis-
tinguishes the French regime for issuers of crypto-assets from
the Maltese framework where the registration of a whitepaper
is mandatory in all cases where an asset qualifies as a VFA by
virtue of the FIT and is being offered to the public or proposes
to be admitted to trading on a DLT Exchange. The Test itself
is also a distinctive characteristic given that there seems to be
no such test under the French Framework.
Like the Maltese VFA Act, the French framework also
regulates and imposes authorisation requirements in respect
of persons seeking to provide certain services in relation to
digital assets. It is interesting to note that the services listed
under Art. L. 54-10-2 of the MFC, as amended, are similar
to those provided by the Second Schedule to the VFA
Act.66 Like the Maltese Framework, France has also set out
within its legislation a number of requirements, including
authorisation requirements, which service providers must
follow with the national competent authority supervising
adherence thereto. In this respect, experience suggests that
the oversight of a competent authority is crucial for a regulat-
ory framework to operate properly.
Further to the above, both French and Maltese policy
makers are attempting to address the issue of access to
banking services, particularly the opening of accounts for
issuers of crypto-assets and persons providing services in
relation thereto. Malta has issued guidance for credit insti-
tutions, payment institutions, and electronic money insti-
tutions opening accounts for Fintechs, for consultation,67 in
order for such institutions to acquire a better understanding
of risks of any prospective customers, active in technology
reliant areas, prior to servicing them. On the other hand,
France has gone a step further and included a requirement,
within its legal framework, for credit institutions to put in
place objective, non-discriminatory and proportionate rules
to govern the access of token issuers who have obtained a
visa, as well as to registered and authorised service providers.68
That being stated, French law seems to be silent on the con-
sequences for credit institutions that do not enact such rules.
Whilst both approaches have the same aim – i.e. that of
allowing issuers and service providers access to banking ser-
vices – it may be argued that Maltese policy makers should
consider introducing a provision similar to that put forward
by France. That being stated, it would appear that the
approach taken by Malta to date, leaves more discretion at
the hands of the banks, specifically with respect to the type
of business models of the clients which they on-board.
On a different note, another distinctive feature between
the two regimes is that the Maltese framework, by virtue of
two other legislative acts, the Malta Digital Innovation Auth-
ority (“MDIA”) Act,69 and the Innovative Technology
Arrangements and Services (“ITAS”) Act,70 also encompasses
the technology aspect of the crypto-asset space, something
which the French regime, and for that matter all other
regimes, do not. It therefore appears that Malta has put
forward a regulatory framework which provides for a holistic
regulatory/supervisory approach – with the financial services
aspect of a business being regulated by the MFSA under the
VFA Act, and the technology side by the MDIA by virtue
of the ITAS Act. This ensures that each aspect of an operation
is regulated by an authority which has the requisite sector-
specific knowledge.
The next section of the paper examines the role of the
VFA Agent in terms of the VFA framework.
3. The VFA Agent – the rationale of this
functionary within the context of the VFA
framework
The VFA Act introduced the concept of the VFA Agent, with
the aim of having a functionary acting as the initial point of
contact for prospective persons wishing to operate under
the VFA Act, meaning issuers of VFAs and VFA services pro-
viders. By conducting a fitness and properness assessment prior
to on-boarding any person as its client,71 the VFA Agent will
act as the first line of defence for the Maltese financial system
against financial market misconduct by preventing persons
who are not fit and proper from setting up operations in or
from Malta and in this light, the VFA Agent will also serve
as a tool to mitigate reputational risk and enhance investor

protection. Onus is therefore placed on a service provider
acting on behalf of prospective clients to ensure that such
persons are fit and proper prior to being onboarded and there-
fore ensuring that only persons who are honest, competent
and solvent are allowed access to the jurisdiction. Given
that a safe reliance can be made on the VFA Agent, it is
reasonable to suggest that this should also ensure that the auth-
orisation process is efficient. That being stated, the VFA
Agent’s checks will not replace those of the Authority, but
the fact that the VFA Agent would have already assessed the
applicant would inevitably make the process more efficient
as a certain degree of reliance can be made on the agent.
Drawing heavily from the roles of the sponsor and the
compliance officer under the traditional framework, the
VFA Act provides for three types of VFA Agents: [i] VFA
Agents appointed in terms of Article 7 – these VFA Agents
can on-board issuers of VFAs as their clients; [ii] VFA
Agents appointed in terms of Article 14 – these may on-
board applicants for a VFA services licence as their clients;
and [iii] VFA Agents appointed in terms of Articles 7 and
14 who may on-board both issuers of VFAs and applicants
for a VFA services licence. The Act defines a VFA Agent as
follows:
“VFA agent” means a person registered with the compe-
tent authority under this Act and authorised to carry on
the profession of:
(a) advocate, accountant or auditor; or
(b) a firm of advocates, accountants or auditors, or corporate services
providers; or
(c) a legal organisation which is wholly owned and controlled by
persons referred to in paragraphs (a) or (b),
whether in Malta or in another recognised jurisdiction, or any other
class of persons holding authorisations, qualifications and, or
experience deemed by the competent authority as possessing suit-
able expertise to exercise the functions listed under articles 7
and, or 14;72
Even though this definition may seem to imply that a natural
person may act as VFA Agent, clarity is provided by Chapter 1
of the VFA Rulebook73 which sets out the requirement for a
VFA Agent to be a legal person.74 It may be argued that this
was an effort to raise the bar for VFA Agents, as experience
suggests that requirements, such as those relating to ongoing
capital, are more challenging to monitor and supervise in
the case of natural persons. Furthermore, certain require-
ments, such as that of having at least three designated
persons appointed with the VFA Agent,75 cannot be
implemented if the VFA Agent was a natural person.
Apart from acting as gatekeeper at authorisations stage, the
VFA Agent has an on-going role with regard to issuers and has
the responsibility and obligation under the Act,76 to submit all
the necessary documentation required by the MFSA,77 and to
liaise and correspond as necessary with the Authority vis-a-vis
its client.78 Indeed, whilst the role of the VFA Agent
appointed in terms of Article 14 stops once the process for
application for authorisation is completed, the role of the
VFA Agent appointed in terms of Article 7 is ongoing and
such VFA Agent is required to submit to the MFSA, on
Law and Financial Markets Review 5
behalf of the administrators of the issuer, on an annual basis,
a certificate of compliance in relation to the issuer.79 In this
light it is suggested that the ongoing role of the VFA Agent
in relation to Issuers of VFAs is linked to Issuers not being
regulated directly under the VFA framework, but rather
indirectly through a number of requirements which must be
satisfied for a whitepaper to be registered with the Authority.
That being stated, the VFA Agent’s role with an Issuer is
similar to that of a compliance officer being appointed with
a service provider given that the role is ongoing and the func-
tions are similar.
The Act also designates a VFA Agent as being a subject
person for purposes of the Anti-Money Laundering Act in
Malta and therefore subject to AML/CFT regulation.80 Des-
ignating these agents as subject persons for the purposes of
AML/CFT was one of the policy decisions taken by the Gov-
ernment of Malta to ensure that Malta’s financial market
integrity is safeguarded, as the agent adds an additional layer
of AML/CFT checks in this regard, for example through
ongoing fitness and properness checks which the VFA
Agent must perform on Issuers which it on-boards as its
clients. Even though it appears that strong AML/CFT con-
trols are entrenched in the legal framework, one may still
argue that these may be further strengthened, for example
by introducing powers for the Authority to take action in
cases where it suspects that there are AML/CFT shortcomings
for which an operator has not yet been sanctioned. This line
of thought is further strengthened when taking into account
that one of the main risks of this business is money launder-
ing/terrorist financing.81
The designation of a VFA Agent as a subject person for
purposes of AML/CFT legislation evidences that Malta has
gone beyond what is required by the EU’s 5AMLD. Whilst
5AMLD extends the scope of the fourth Anti-Money Laun-
dering Directive to cover: providers engaged in exchange ser-
vices between virtual currencies and fiat currencies; and
custodian wallet providers,82 Maltese legislation goes
beyond and captures all operators under the VFA including
the VFA Agent, a functionary which is not contemplated
by EU legislation. It is reasonable to state that this approach
may be seen to complement the FATF’s objective of mitigat-
ing risks in the crypto-asset space, as discussed in section 2
above.
In view of the above, one may safely state that the intro-
duction of the VFA Agent complements the Authority’s func-
tions as set out under Article 4 of the Malta Financial Services
Authority Act, particularly the promotion of financial market
integrity, the legitimate expectations of consumers of financial
services, fair competition practices, financial stability,83 as well
as high standards of conduct throughout the financial
system.84
4. The regulatory requirements applicable to
VFA Agents
As aforestated, the VFA Act requires persons performing the
activity of a VFA Agent to be registered with the MFSA.
Whilst the Act sets out, albeit at a high level, the role and
6 C. P. Buttigieg and G. Sapiano
responsibilities of the VFA Agent, the detailed obligations are
stipulated in Chapter 1 of the VFA Rulebook – Virtual Finan-
cial Assets Rules for VFA Agents. The chapter is divided into
4 titles as follows: [i] General Scope and High-Level Prin-
ciples; [ii] Registration requirements for VFA Agents; [iii]
Ongoing Obligations; and [iv] Enforcement and Sanctions.
Whilst this section will highlight the salient requirements
thereof, it is not intended to provide a comprehensive over-
view of the requirements for VFA Agents.
4.1. General principles
The first Title of Chapter 1 sets out the high level principles
which VFA Agents should abide by when providing their
VFA activity in or from within Malta. These are essentially
the high level requirements applicable to all entities regulated
by the MFSA. In summary, VFA Agents are required to act
ethically in the best interests of their clients and the integrity
of Malta’s financial system,85 honestly, fairly and profession-
ally,86 and to cooperate with the Authority in an open and
honest manner and to provide it with any information it
may require.87 These general principles reflect the three
main objectives of financial services regulation – ensuring
investor protection; promoting market integrity; and safe-
guarding financial soundness.
4.2. Registration requirements
Persons wishing to act as a VFA Agent are to apply for regis-
tration with the Authority in accordance with Title 2 of
Chapter 1 of the VFA Rulebook.88 As aforestated, such
person must be a legal person and at least three individuals
are to be proposed to the Authority by the applicant to act
as designated persons. These persons are those individuals
who will be responsible for performing the activity of a
VFA Agent.89 Individuals proposed as designated persons
will be subject to a rigorous assessment of competence by
the Authority90 in order to ensure a high level of competence
for operators – this should in turn result in a better service
being offered to the clients, and given the VFA Agent’s
role, additional safeguards to the Maltese financial services
sector.
Furthermore, one of the three designated persons must be
the VFA Agent’s proposed Money Laundering Reporting
Officer (“MLRO”) and as such also responsible for ensuring
the VFA Agent’s compliance with the Implementing Pro-
cedures issued by Malta’s Financial Intelligence Analysis
Unit (“FIAU”).91 In this light, the FIAU’s assistance is
sought when determining whether a person proposed to act
as MLRO is sufficiently competent to perform this role.
Apart from further stressing the importance of having compe-
tent individuals appointed as designated persons, this approach
also demonstrates a high level of collaboration between the
two Authorities.
In order to ensure financial soundness of persons seeking to
act as VFA Agents, the Rules also set out initial capital
requirements,92 which must be fully paid up and must
consist of cash and cash equivalents in terms of International
Accounting Standards.93 The Initial Capital requirements
are as follows:94
Registration Type Initial Capital (€)
VFA Agent registering in terms of (i) 75,000 and mandatory
Article 7 PII; or
(ii) 150,000
VFA Agent registering in terms of 75,000 and PII on a best
Article 14 effort basis
VFA Registering in terms of both (i) 75,000 and mandatory
Articles 7 and 14 PII; or
(ii) 150,000
Given its role as gatekeeper, preventing persons who are
not fit and proper from entering the financial system, the
VFA Agent is considered as crucial, within the VFA frame-
work, for market integrity. As stated in the Consultation
Paper of the 4 September 2018,95 the MFSA wants to
ensure that only persons with the right competences who
are appropriately resourced will be eligible for registration as
VFA Agents. As aforestated, capital requirements are a
means of ensuring financial soundness in the best interest of
investors and the market. In this respect the Authority con-
siders the capital requirements set out as being commensurate
to the risk of the business of a VFA Agent.
Once a complete application for registration as a VFA
Agent is submitted to the MFSA, as part of the vetting
process, the Authority considers: [i] the protection of investors
and the general public; [ii] the protection of the reputation of
Malta taking into account Malta’s international commitments;
[iii] the promotion of innovation, competition and choice;
and [iv] the reputation and suitability of the Applicant and
all other parties connected with the applicant.96 In doing so,
the Authority also evaluates the fitness and properness of the
applicant97 by assessing: [i] Integrity; [ii] Competence; and
[iii] Solvency.98
The registration process itself is then divided into three
phases – the preparatory phase which spans from the appli-
cant’s submission of a statement of intent to apply for regis-
tration to the submission of a complete application,99 the
pre-registration phase which, provided that everything is in
order, leads to the granting of an in-principle registration
valid for a period of three months within which the applicant
is to satisfy a number of requirements set out in the in prin-
ciple registration.100 Once the requirements of the in-prin-
ciple registration are satisfied, the Authority would proceed
to register the applicant as a VFA Agent.101 Notwithstanding
the registration, a VFA Agent may be required to satisfy,
within set time frames a number of post-registration
matters, prior to commencement of business. This phase is
termed the post-registration/pre-commencement of business
stage.102
It is evident that the registration process and the respect-
ive registration requirements, reflect the three high level
principles of financial services regulation – initial capital
requirements, for example, ensure that applicants are finan-
cially sound, whilst fitness and properness assessments may
also be considered as additional safeguard for investors
and market integrity. Through thorough assessments of
competence, solvency and integrity, the registration
process itself is designed to ensure that only fit and proper
persons enter the financial system as VFA Agents.

Furthermore, it is important to highlight that VFA Agents
must be fit and proper both at registration stage as well as
on an on-going basis.
Further to the above, the Rules also contain the processes
which are to be followed for: [i] the revision of a registration –
where a VFA Agent wishes to amend its registration;103 [ii]
changes in qualifying holding and beneficial ownership of
VFA Agents;104 [iii] voluntary suspension of VFA regis-
trations;105 [iv] the cessation of the business of a VFA
Agent;106 and [v] the approval and departure process for
designated persons and appointed persons.107 Whilst these
rules are procedural in nature, aimed at streamlining the
respective processes, they clearly demonstrate that the Auth-
ority has considered all facets of the life-cycle of the VFA
Agent, including cessation of business. From a supervision
point of view, having such processes enshrined within the
Rulebook will ensure efficiency and efficacy by providing
the Authority with sufficient visibility for it to be able to prop-
erly carry out its functions.
4.3. Ongoing obligations
The Rules also stipulate a number of requirements which
VFA Agents must abide by on an ongoing basis. Further to
the general requirements applicable to all VFA Agents, the
rules also set out supplementary requirements for those VFA
Agents registered under Article 7 as well as those registered
in terms of article 14. As shall be explained hereunder, these
requirements are all aimed at safeguarding investors, promot-
ing market integrity and ensuring financial stability.
4.3.1. General requirements
Section 2 of Title 3 sets out the general requirements which
all VFA Agents must satisfy on an ongoing basis. VFA Agents
are i. alia required to have adequate business organisation,
systems, experience and expertise to exercise their role,108
as well as to maintain sufficient records to be able to demon-
strate compliance with the regulatory framework for a
period of five years, which may be extended to seven years
at the Authority’s discretion.109 The latter, when coupled
with the MFSA’s power to request information from the
VFA Agent and the VFA Agent’s obligation to provide it
with any material requested, ensures that the Authority has
access to any information it requires to carry out its
functions.
VFA Agents are also obliged to maintain the initial capital
required at registration stage and to have at least three desig-
nated persons in place, at all times.110 The number of desig-
nated persons required would depend wholly on the
business model of the VFA Agent, particularly the nature,
size and complexity of the operation.
As stated in the preamble to MiFID II, “There is agree-
ment among regulatory bodies at international level that
weaknesses in corporate governance … have been a con-
tributory factor to the financial crisis”111 In reaction the
European Union reacted by imposing more onerous
requirements on regulated firms. By replicating the high
level principles of European Legislation, the rulebook also
establishes a number of obligations related to governance,
Law and Financial Markets Review 7
such as the requirement for the business to be effectively
directed by at least two individuals in satisfaction of the
dual control principle, as well as to establish and implement
a number of systems (including due diligence systems), pro-
cesses and procedures which should be monitored and eval-
uated at least every six months.112 In this light, it may be
argued that the imposition of requirements which are ana-
logous to those of the traditional framework for financial
services, is further evidence that the VFA framework seeks
to ensure robust safeguards for investors and market
integrity.
With respect to Professional Indemnity Insurance
(“PII”) the rules stipulate that VFA Agents are to make
every effort to take out and maintain full PII.113 Whilst
the requirement is to make every effort to obtain PII,
those VFA Agents which do so may benefit from reduced
capital requirements as per R1-2.1.2.6. The original
version of Chapter 1 of the Rulebook, issued for consul-
tation on the 12 July 2018 had also included PII on a best
efforts basis;114 however obtaining PII would not have
affected the quantum of initial and on-going capital
required, given that this was fixed at EUR50,000.115
Whilst it would probably have been ideal to subject VFA
Agents to a compulsory PII requirement, it was at the
time unclear whether such policies were available – and
this remains the status quo to date. It is reasonable to
assume that it was for this reason that the Authority retained
the maintenance of a PII policy as a requirement which
must be met on a best efforts basis; however, the Rulebook,
as amended following public consultation, introduces
reduced capital requirements for VFA Agents who
manage to obtain such policy.
As aforestated, prior to on-boarding a client, the VFA
Agent must perform a fitness and properness assessment.
Whilst this is reiterated within the Rulebook,116 Chapter 1
also provides the procedure which VFA Agents must follow
when they find a prospective client not to be fit and proper
– they must inform the Authority immediately explaining
why they do not consider such person to be fit and
proper.117 The aim of this procedure is twofold given that it
provides the Authority with information on persons seeking
to enter the Maltese financial services sector, as well as on
the level and quality of checks being performed by the VFA
Agents themselves, particularly where a person who is not
on-boarded by one VFA Agent gets on-boarded by
another. In such case the Authority would need to consider
why such person was on-boarded by a VFA Agent and not
by another – this could ultimately lead to an assessment of
the checks being performed by the VFA Agents on prospec-
tive clients.
The Rules also set out requirements for outsourcing,118
procedures for reporting of breaches,119 instances where
more than one VFA Agent is appointed120 and Conduct of
Business Obligations121 which include requirements on con-
flicts of interest, remuneration operational independence and
personal transactions. These requirements further evidence
the holistic approach taken by the Maltese regulator in pro-
viding a comprehensive and robust regulatory framework
which seeks to protect investors, safeguard financial soundness
and promote market integrity.
8 C. P. Buttigieg and G. Sapiano

4.3.2. Supplementary conditions for VFA Agents appointed in for service providers as opposed to issuers, given that the
terms of Article 7 former are directly regulated and the role of the VFA
Agent would be absorbed by the Compliance Officer. It is
A VFA Agent engaged with an issuer has a role which is
in this light that the rules explicitly allow the VFA Agent
ongoing and therefore, there are certain obligations which
to continue his role with its client, subsequent to such
the VFA Agent must satisfy subsequent to the registration of
client being licenced, as Compliance Officer.
a whitepaper. First and foremost, the VFA Agent must
ensure that the issuer is a fit and proper person on an
ongoing basis122 and must also endorse determinations made 4.4. Enforcement and sanctions
by the issuer pursuant to the FIT.123 Where applicable, the
Like the Act, breaches of the rules render the VFA Agent liable to
VFA Agent must also ensure that the issuer has provided
administrative penalties not exceeding €150,000. The Rules
investors with a roadmap124 and that any necessary public dis-
however go further and set out criteria – aggravating and mitigat-
closures are made.125
ing factors – which are to be taken into account by the Authority
The VFA Agent is also responsible to submit to the Auth-
when establishing the quanta of the penalties.129 When taking
ority, on an annual basis, a Compliance Certificate in relation
enforcement action, the MFSA follows the procedure for enfor-
to the issuer. This certificate is to be drawn up by the issuer,
cement action provided under the MFSA Act; i.e. enforcement
reviewed by the VFA Agent and signed by all members of
decisions are to be taken by the Enforcement Decisions Com-
the issuer’s Board of Administration.126 The compliance certi-
mittee. This ensures that the principles of natural justice are
ficate is to contain: [i] a confirmation obtained from the issuer’s
respected by ensuring that enforcement decisions are taken by
MLRO that all the local AML/CFT requirements have been
an independent committee which gives entities the opportunity
satisfied; [ii] a confirmation from the issuer’s systems auditor
to provide representations, respectively satisfying the doctrines of
that the issuer’s innovative technology arrangements comply
nemo judex in causa sua and audi alteram partem. The procedure for
with any qualitative standards set and guidelines issued by the
enforcement decisions was recently introduced, by virtue of Act
Malta Digital Innovation Authority; [iii] a statement, from
VIII of 2019130 – the latest amendments to the MFSA Act –
the VFA Agent, as to whether the issuer is a fit and proper
which set out a clear distinction between the supervisory and
person; and [iv] a statement from the issuer’s administrators as
investigative arms of the Authority. As aforestated, decisions
to whether there have been any breaches of the act.127
for enforcement action would be taken by an independent
The certificate of compliance, drawn up by the issuer,
Enforcement Decisions Committee which gives entities the
reviewed by the VFA Agent, and submitted to the Authority
right to provide representations. In this light, it may reasonably
should enhance the compliance culture within the sector,
be stated that the MFSA Act, as amended satisfies the aforemen-
given that the issuer would be aware that the statements con-
tioned principles of natural justice.
tained therein would be reviewed by its VFA Agent – an
independent party who is knowledgeable of the framework.
By requiring the VFA Agent to review the issuer’s certificate
5. Conclusion
of compliance, the rulebook places a degree of responsibility
on the VFA Agent and may therefore allow the Authority
The concept of the VFA Agent is a novel one. Introduced to
to, to a certain extent, rely on the VFA Agent with respect
ensure that a first line of defence independent from the Authority
to the veracity of the statements contained therein.
is set up in order to keep persons who are not fit and proper out
Further to the compliance certificate, the VFA Agent is
of the Maltese financial services industry, the VFA Agents’
also required to submit an AML/CFT report, prepared by
checks do not replace those performed by the Authority; but
an independent auditor engaged by the issuer, which includes:
rather complement them by introducing yet another filter.
[i] a confirmation that the AML/CFT systems and controls
Whilst this evidences the MFSA’s commitment to protect the
that the issuer purports to have in place are indeed in place;
integrity of the local financial services sector, it will also ensure
and [ii] a review of the implementation of such AML/CFT
effective investor protection and safeguard the soundness of
systems and controls.128 This demonstrates the importance
operators. A proper functioning framework for VFA Agents
of financial crime compliance within the VFA Framework,
should reduce the risk of financial market misconduct and
given that the rules explicitly require an issuer to appoint an
crime, which should, in turn, serve as an additional safeguard
independent third party to provide an additional level of scru-
for consumers and Malta’s reputation as a financial centre.
tiny with respect to AML/CFT.
It is respectfully submitted that a debate is necessitated at
international level with respect to the introduction of a frame-
4.3.3. Supplementary conditions for VFA Agents appointed in
work for a functionary similar to the VFA Agent applied
terms of Article 14
within the traditional financial services sphere. One may
The role of the VFA Agent appointed with an applicant for a argue that this would decrease the incidence of financial
VFA services licence ends once the Authority grants or crime throughout the financial services sector by introducing
refuses to grant a licence. Whilst this is made clear by a filter which is additional to checks performed by the national
virtue of R1-3.4.1, R1-3.4.2 goes a step further and stipu- competent authorities.
lates that the VFA Agent may, subject to be so proposed
by a licence holder, continue his relationship with his Dr Christopher P. Buttigieg is the Chief Officer respon-
client as Compliance Officer. As was suggested in Section sible for Strategy, Policy and Innovation at the MFSA and
3 above, it would appear that a different approach is taken the Chair of the European Securities and Markets Data

Standing Committee. He is a lecturer at the University of
Malta and has a PhD in law studies focusing on financial
regulation and supervision from the University of Sussex
(UK). cbuttigieg@mfsa.com.mt; Dr Gerd Sapiano is a
policy expert in the field of crypto asset regulation at the
MFSA and formed part of the team which drafted the
Notes
1
For purposes of this paper, the term crypto-assets shall refer to
those assets based on distributed ledger technology which do
not qualify as traditional investment instruments.
2
Forbes, Rachel Wolfson, Silvio Schembri explains how
Malta has become the Blockchain Island, 31 July 2018,
https://www.forbes.com/sites/rachelwolfson/2018/07/31/
silvio-schembri-explains-how-malta-has-become-the-worlds-
blockchain-island/.
3
As the single regulator for financial services in Malta, the MFSA
regulates and supervises: credit institutions, financial institutions,
securities markets, recognised investment exchanges, investment
services companies and collective investment schemes, insurance
companies and insurance intermediaries, trustees, company ser-
vices providers and pension schemes. Recently, as shall be
explained further in this paper, the MFSA also started regulating
the crypto-asset sector.
4
The Authority’s first initiative in this field was the publication of
a Consultation on the Proposed Regulation of Collective
Investment Schemes investing in Virtual Currencies, https://
www.mfsa.com.mt/GetFile.php?type=site&file=
Announcements/Consultation/2017/20171023_VCFunds_
PIFs_ConsDoc.pdf.
5
Discussion Paper on Initial Coin Offerings, Virtual Currencies
and related Service Providers, https://www.mfsa.com.mt/
pages/readfile.aspx?f=/files/Announcements/Consultation/
2017/20171130_DiscussionPaperVCs.pdf.
6
Government Consultation Paper on The establishment of the
Malta Digital Innovation Authority; the Framework for the
Certification of Distributed Ledger Technology Platforms and
Related Service Providers; and a Virtual Currency Act,http://
meae.gov.mt/en/Public_Consultations/OPM/Documents/PS
%20FSDEI%20-%20DLT%20Regulation%20Document%
20OUTPUT.PDF.
7
IOSCO, Objectives and Principles of Securities Regulation,
June 2010, available online: https://www.iosco.org/library/
pubdocs/pdf/IOSCOPD323.pdf.
8
https://coinmarketcap.com/all/views/all/ as at April 2019.
9
The VFA Act lists eight VFA services under its Second Schedule
(vide Appendix to this paper). Persons providing any of these
services in relation to a VFA would require a licence from the
MFSA. VFA service providers may range from brokers/interme-
diaries simply providing reception and transmission of orders to
more complex business models including the operation of VFA
exchanges.
10
As shall be explained in further detail in subsequent sections of this
paper, the VFA Agent is a functionary introduced by virtue of the
VFA Act, to act as a point of liaison between the Authority and
market players, as well as an additional filter keeping persons
who are not fit and proper out of the financial system by perform-
ing checks preceding those conducted by the Authority.
11
MFSA, The Financial Instrument Test, https://www.mfsa.com.
mt/fintech/virtual-financial-assets/guidance/financial-
instrument-test.
12
See amongst others: Crypto-currency bubbles: an application of
the Phillips–Shi–Yu (2013) methodology on Mt. Gox bitcoin
Law and Financial Markets Review 9
Virtual Financial Assets framework. He has a law degree
(LL.D.) and a masters in financial services (M.A. Fin Ser.)
from the University of Malta. The opinions expressed in
this paper are those of the authors and do not reflect those
of the MFSA. Any errors or inaccuracies are attributable
exclusively to the authors. ▪
prices: Cheung, Adrian (Wai-Kong); Roca, Eduardo; Su, Jen-
Je, Applied Economics, 6 February 2015, 1–11; E Micheler,
“Custody Chains and Asset Values: Why Crypto-Securities are
Worth Contemplating” (2015), 74(3) The Cambridge Law
Journal 505–33; N Kshetri and J Voas, “Do Crypto-Currencies
Fuel Ransomware?” (2017), 19(5) IT Professional 11–15; H
Botoş, “Bitcoin Intelligence – Business Intelligence meets
Crypto Currency” (2017) 9(3) CES Working Papers 488–505.
13
CP Buttigieg and C Efthymiopoulos, “The Regulation of
Crypto Assets in Malta: The Virtual Financial Assets Act and
Beyond” (2018) Law and Financial Markets Review.
14
In this regard the authors have consulted with: [i] Dr Ian Gauci,
Partner GTG Advocates, Afilexion Alliance and Caledo Group;
[ii] Dr Max Ganado, Senior Partner, Ganado Advocates; [iii] Mr
James Farrugia, Partner, Ganado Advocates; and [iv] Ms Stépha-
nie Cabossioras, Direction des affaires juridiques, Autorité des
marchés financiers (AMF).
15
Financial Stability Board, “Crypto-assets: Work Underway,
Regulatory Approaches and Potential Gaps” (31 May 2019),
https://www.fsb.org/wp-content/uploads/P310519.pdf.
16
European Central Bank, Occasional Paper Series, ECB Crypto-
assets Task Force, “Crypto-Assets: Implications for Financial
Stability, monetary policy, and payments and market infrastruc-
tures”, https://www.ecb.europa.eu/pub/pdf/scpops/ecb.
op223~3ce14e986c.en.pdf.
17
Financial Action Task Force, “Virtual Currencies: Key Defi-
nitions and Potential AML/CFT Risks” (June 2014), http://
www.fatf-gafi.org/media/fatf/documents/reports/Virtual-
currency-key-definitions-and-potential-aml-cft-risks.pdf.
18
Financial Action Task Force, “Public Statement – Mitigating
Risks from Virtual Assets”, http://www.fatf-gafi.org/
publications/fatfrecommendations/documents/regulation-virtual-
assets-interpretive-note.html.
19
Financial Action Task Force, “Public Statement – Mitigating
Risks from Virtual Assets”, Point 1, http://www.fatf-gafi.org/
publications/fatfrecommendations/documents/regulation-virtual-
assets-interpretive-note.html.
20
Financial Action Task Force, “Public Statement – Mitigating
Risks from Virtual Assets”, Point 3, http://www.fatf-gafi.org/
publications/fatfrecommendations/documents/regulation-virtual-
assets-interpretive-note.html.
21
Financial Action Task Force, “Public Statement – Mitigating
Risks from Virtual Assets”, Points 5 and 6, http://www.
fatf-gafi.org/publications/fatfrecommendations/documents/
regulation-virtual-assets-interpretive-note.html.
22
Financial Action Task Force, “Public Statement – Mitigating
Risks from Virtual Assets”, Point 8, http://www.fatf-gafi.org/
publications/fatfrecommendations/documents/regulation-virtual-
assets-interpretive-note.html.
23
ESMA, Statement: ESMA alerts firms involved in Initial Coin
Offerings (ICOs) to the need to meet relevant regulatory
requirements, ESMA50-157-828 (November 2017).
24
ESMA, Statement: ESMA alerts firms involved in Initial Coin
Offerings (ICOs) to the need to meet relevant regulatory
requirements, ESMA50-157-828 (November 2017).
10 C. P. Buttigieg and G. Sapiano
25
The SEC has jurisdiction over those crypto-assets which classify
as securities.
26
The CFTC has classified certain crypto-assets as commodities.
27
TG Massad, “It’s Time to Strengthen the Regulation of Crypto-
Assets” (March 2019), https://www.brookings.edu/wp-
content/uploads/2019/03/Economis-Studies-Timothy-Massad-
Cryptocurrency-Paper.pdf.
28
Laws of Malta, Chapter 331, Trusts and Trustees Act, http://
www.justiceservices.gov.mt/DownloadDocument.aspx?app=
lom&itemid=8805.
29
Mauritius have opted to enact individual pieces of legislation in
order to regulate the sector.
30
Mauritius Financial Services Commission, Fintech Series, Gui-
dance Note, Recognition of Digital Assets as an Asset-class for
investment for Sophisticated and Expert Investors, 17
September 2018, https://www.fscmauritius.org/media/55003/
guidance-note-on-the-recognition-of-digital-assets.pdf.
31
K Kawai and T Nagase, “The Virtual Currency Regulation
Review – Edition 1” The Law Reviews (Japan, November
2018), https://thelawreviews.co.uk/edition/the-virtual-currency-
regulation-review-edition-1/1176654/japan.
32
BlockchainBitcoin Info, How 5 Asian countries regulate crypto-
currency, https://superblockchainbitcoin.com/2019/04/08/
how-5-asian-countries-regulate-cryptocurrency/.
33
ESMA, Advice: Initial Coin Offerings and Crypto-assets, 9
January 2019, ESMA50-157-1391, https://www.esma.europa.
eu/sites/default/files/library/esma50-157-1391_crypto_advice.
pdf.
34
EBA, Report: Report with advice for the European Commis-
sion on crypto-assets (9 January 2019), https://eba.europa.eu/
documents/10180/2545547/EBA±Report±on±crypto±assets.
pdf.
35
French Senate Website – Projet de loi relatif à la croissance et la
transformation des entreprises, http://www.senat.fr/leg/pjl18-
028.html.
36
French Parliament Website – PACTE, the Action Plan for
business growth and transformation, https://www.
gouvernement.fr/en/pacte-the-action-plan-for-business-growth-
and-transformation.
37
PACTE Bill, Article 26.
38
PACTE Bill, Article 26a.
39
Government of France website, PACTE – the action plan for
business growth and transformation, https://www.
gouvernement.fr/en/pacte-the-action-plan-for-business-growth-
and-transformation.
40
CONSOB, Call for Evidence: Initial Coin Offerings and
Crypto-Assets Exchanges, 19 March 2019, http://www.
consob.it/documents/46180/46181/doc_disc_20190319_en.
pdf/e981f8a9-e370-4456-8f67-111e460610f0.
41
Q.15. CONSOB, Call for Evidence: Initial Coin Offerings
and Crypto-Assets Exchanges, 19 March 2019, http://www.
consob.it/documents/46180/46181/doc_disc_20190319_en.
pdf/e981f8a9-e370-4456-8f67-111e460610f0.
42
In this respect reference should be made to:
ESMA: Supervisory Convergence, https://www.esma.
europa.eu/convergence/supervisory-convergence
EBA: Supervisory Convergence, https://eba.europa.eu/
supervisory-convergence
EIOPA: Supervisory Convergence Plan and Activities,
https://eiopa.europa.eu/Pages/Supervision/Common-supervisory-
culture/Supervisory-Convergence-Plan.aspx
43
MFSA, Discussion Paper on Initial Coin Offerings, Virtual
Currencies and related Service Providers (30 November
2017), https://www.mfsa.com.mt/pages/readfile.aspx?f=/files/
Announcements/Consultation/2017/20171130_Discussion
PaperVCs.pdf.
44
ESMA, Statement: ESMA alerts firms involved in Initial Coin
Offerings (ICOs) to the need to meet relevant regulatory
requirements, ESMA50-157-828 (November 2017).
45
Maltese Parliament Website, Bill No. 44, Virtual Financial
Assets Bill, https://parlament.mt/13th-leg/bills/bill-no-044-
virtual-financial-assets-bill/.
46
Laws of Malta, Act XXX of 2018, http://www.justiceservices.
gov.mt/DownloadDocument.aspx?app=lp&itemid=29201&l=1.
47
Laws of Malta, Chapter 590, Virtual Financial Assets Act, http://
www.justiceservices.gov.mt/DownloadDocument.aspx?app=
lom&itemid=12872&l=1
48
Laws of Malta, S.L.590.01, VFA Regulations.
49
VFA Rulebook, https://www.mfsa.com.mt/fintech/virtual-
financial-assets/rules/.
50
VFA Act, Article 7(1)(b) and 14(3).
51
VFA Regulations, Part IV.
52
VFA Act, Article 7(1) and 14 (1).
53
VFA Rulebook, R2-2.2.6.1.
54
VFA Act, Article 23.
55
Directive (EU) 2018/843 of the European Parliament and of the
Council of 30 May 2018 amending Directive (EU) 2015/849 on
the prevention of the use of the financial system for the purposes
of money laundering or terrorist financing, and amending
Directives 2009/138/EC and 2013/36/EU, https://eur-lex.
europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32018
L0843&from=EN.
56
ESMA, Statement: ESMA alerts firms involved in Initial Coin
Offerings (ICOs) to the need to meet relevant regulatory
requirements, ESMA50-157-828 (November 2017).
57
VFA Act, Article 2(2), definition of “DLT Asset”.
58
VFA Act, Article 2(2), definition of “Virtual Financial Asset”.
59
Laws of Malta, Chapter 590, Virtual Financial Assets Act, Article 2.
60
It appears that the term visa, as used in the French legislation, is a
type of authorisation issued by the AMF.
61
Projet de Loi relatif à la croissance et la transformation des entre-
prises (PACTE), Article 85, Art. L. 552-4 “Préalablement à
toute offre au public de jetons, les émetteurs peuvent solliciter
un visa de l’Autorité des marchés financiers … ”, http://www.
assemblee-nationale.fr/15/ta/tap0258.pdf.
62
Projet de Loi relatif à la croissance et la transformation des entreprises
(PACTE), Article 86, Art. L. 54-10-3 “– Avant d’exercer leur acti-
vité, les prestataires des services mentionnés aux 1° et 2° de l’article
L. 54-10-2 sont enregistrés par l’Autorité des marchés financiers
… ”, http://www.assemblee-nationale.fr/15/ta/tap0258.pdf.
63
Projet de Loi relatif à la croissance et la transformation des entre-
prises (PACTE), Article 85, Art. L. 552-4, http://www.
assemblee-nationale.fr/15/ta/tap0258.pdf.
64
Projet de Loi relatif à la croissance et la transformation des entre-
prises (PACTE), Article 85, Art. Art. L. 552-5, http://www.
assemblee-nationale.fr/15/ta/tap0258.pdf.
65
Projet de Loi relatif à la croissance et la transformation des entre-
prises (PACTE), Article 85, Art. Art. L. 552-5, http://www.
assemblee-nationale.fr/15/ta/tap0258.pdf.
66
Vide Appendix which provides a comparison between the two.
67
MFSA and FIAU joint Consultation document on guidance for
credit institutions, payment institutions, and electronic money
institutions opening accounts for Fintechs, https://www.mfsa.
com.mt/wp-content/uploads/2019/03/20190327_Consultation
DocumentAccountsForFinTechs.pdf.
68
Projet de Loi relatif à la croissance et la transformation des entre-
prises (PACTE), Article 85, Art. L. 552-5, http://www.
assemblee-nationale.fr/15/ta/tap0258.pdf.
 Law and Financial Markets Review 11

69
Laws of Malta, Chapter 591, Malta Digital Innovation Authority 99
VFA Rulebook, Chapter 1 – R1-2.3.3.2.
Act, http://www.justiceservices.gov.mt/DownloadDocument. 100
VFA Rulebook, Chapter 1 – R1-2.3.3.3.
aspx?app=lom&itemid=12873&l=1. 101
VFA Rulebook, Chapter 1 – R1-2.3.3.3.5.
70
Laws of Malta, Chapter 592, Innovative Technology Arrange- 102
VFA Rulebook, Chapter 1 – R1-2.3.3.4.
ments and Services Act, http://www.justiceservices.gov.mt/ 103
VFA Rulebook, Chapter 1 – R1-2.3.4.1.
DownloadDocument.aspx?app=lom&itemid=12874&l=1. 104
VFA Rulebook, Chapter 1 – R1-2.3.4.2.
71
VFA Act, Article 7(1)(b). 105
VFA Rulebook, Chapter 1 – R1-2.3.5.1 to R1-2.3.5.8.
72
VFA Act, Article 2(2), definition of “VFA Agent”. 106
VFA Rulebook, Chapter 1 – R1-2.3.6.1 to R1-2.3.6.6.
73 107
VFA Rulebook, Chapter 1, VFA Rules for VFA Agents, https:// VFA Rulebook, Chapter 1, Section 4, Title 2.
www.mfsa.com.mt/pages/readfile.aspx?f=/files/Legislation 108
VFA Rulebook, Chapter 1 – R1-3.2.1.1.
Regulation/regulation/VF%20Framework/20180917_VFAR_ 109
VFA Rulebook, Chapter 1 – R1-3.2.1.3 and R1-3.2.1.4.
Chapter1.pdf. 110
VFA Rulebook, Chapter 1 – R1-3.2.1.6.
74 111
VFA Rulebook, Chapter 1, R1-2.1.2.4. Directive 2014/65/EU of the European Parliament and of the
75
VFA Rulebook, Chapter 1 – R1-2.1.2.3. COuncil of 15 May 2014 on markets in financial instruments
76
VFA Act, Article 7(1)(a). and amending Directive 2002/92/EC and Directive 2011/61/
77
VFA Act, Article 7(1)(e). EU (recast), https://eur-lex.europa.eu/legal-content/EN/
78
VFA Act, Article 7(1)(f) and (h). TXT/PDF/?uri=CELEX:32014L0065&from=EN.
79
VFA Act, Article 7(1)(j). 112
VFA Rulebook, Chapter 1 – R1-3.2.2.2 to R1-3.2.2.5.
80 113
VFA Act, Article 7(1)(k). VFA Rulebook, Chapter 1, Section 2, Sub-Section 3.
81 114
Schembri Silvio, Investor protection and market integrity, MFSA, Consultation Paper on the Virtual Financial Asset Rules
30 August 2018, https://timesofmalta.com/articles/view/ for VFA Agents, 12 July 2018 – R1-3.2.3.1.
115
investor-protection-and-market-integrity.687912. MFSA, Consultation Paper on the Virtual Financial Asset Rules
82
5AMLD, Article 1(1)(c). for VFA Agents, 12 July 2018 - R1-2.1.2.5.
83
MFSA Act, Article 4(1)(b). 116
VFA Rulebook, Chapter 1 – R1-3.2.6.1.
84
MFSA Act, Article 4(1)(g). 117
VFA Rulebook, Chapter 1 – R1-3.2.6.2.
85
VFA Rulebook, Chapter 1 – R1-1.2.1. 118
VFA Rulebook, Chapter 1, Section 2, Sub-Section 4.
86
VFA Rulebook, Chapter 1 – R1-1.2.2. 119
VFA Rulebook, Chapter 1, Section 2, Sub-Section 5.
87
VFA Rulebook, Chapter 1 – R1-1.2.3. 120
VFA Rulebook, Chapter 1, Section 2, Sub-Section 7.
88
VFA Rulebook, Chapter 1 – R1-2.1.2.2. 121
VFA Rulebook, Chapter 1, Section 2, Sub-Section 8.
89
VFA Rulebook, Chapter 1 – R1-2.1.2.3. 122
VFA Rulebook, Chapter 1 – R1-3.3.1.
90
VFA Rulebook, Chapter 1- R1-2.2.3.3.3. 123
VFA Rulebook, Chapter 1 – R1-3.3.2.
91
VFA Rulebook, Chapter 1 – R1-2.1.2.3. 124
VFA Rulebook, Chapter 1 – R1-3.3.4.
92
VFA Rulebook, Chapter 1 – R1-2.1.2.6. 125
VFA Rulebook, Chapter 1 – R1-3.3.5.
93
VFA Rulebook, Chapter 1 – R1-2.1.2.7. 126
VFA Rulebook, Chapter 1 – R1-3.3.10.1.
94
VFA Rulebook, Chapter 1 – R1-2.1.2.6. 127
VFA Rulebook, Chapter 1 – R1-3.3.10.2.
95
MFSA, Consultation Paper on Raising the Bar for VFA Agents, 128
VFA Rulebook, Chapter 1 – R1-3.3.10.4.
129
4 September 2018. VFA Rulebook, Chapter 1, Title 4.
96
VFA Rulebook, Chapter 1 – R1-2.2.2.1. 130
Act VIII of 2019, the Malta Financial Services Authority
97
VFA Rulebook, Chapter 1 – R1-2.2.2.2. (Amendment) Act, 2019, http://justiceservices.gov.mt/
98
VFA Rulebook, Chapter 1 – R1-2.2.3.1. DownloadDocument.aspx?app=lp&itemid=29521&l=1.

Appendix

VFA Service under VFA Act
Reception and Transmission of
Orders
Execution of orders on behalf of
other persons
Dealing on own account
Portfolio Management
Custodian or Nominee Services
Investment Advice
Placing of virtual financial assets
The operation of a VFA exchange.
Services under the French MFC
Le service de conservation pour le compte de tiers d’actifs numériques ou d’accès à des actifs numériques,
le cas échéant sous la forme de clés cryptographiques privées, en vue de détenir, stocker et transférer des
actifs numériques
Le service d’achat ou de vente d’actifs numériques en monnaie ayant cours légal
Le service d’échange d’actifs numériques contre d’autres actifs numériques
L’exploitation d’une plateforme de négociation d’actifs numériques
1. Les services suivants:
(a) La réception et la transmission d’ordres sur actifs numériques pour le compte de tiers;
(b) La gestion de portefeuille d’actifs numériques pour le compte de tiers;
(c) Le conseil aux souscripteurs d’actifs numériques;
(d) La prise ferme d’actifs numériques;
(e) Le placement garanti d’actifs numériques;
(f) Le placement non garanti d’actifs numériques.