Advisory and Structuring

MFSA prepares to develop cryptocurrency framework - Discussion paper on ICOs and virtual currencies consultation period comes to a close 11th January 2018

The 11th of January will bring a close to the discussion paper consultation period which formally kick-started the process for the regulation of collective investment schemes having as their investment objective the investment in virtual currencies. 

The Malta Financial Service Authority (the ‘MFSA’), Malta’s regulator for the Financial Services industry, published the consultation document in November 2017, consultation on the proposed regulation of Collective Investment schemes investing in virtual currencies.

The MFSA is hoping its discussion paper on Initial Coin Offerings, Virtual Currencies and related Service Providers will lead to a policy framework that supports virtual currencies and related technologies while ensuring effective protection for investors, financial market integrity and stability. 

Virtual currencies such as bitcoin are forms of digital money. Initial Coin Offerings are essentially forms of cryptocurrency crowdfunding, whereby start-ups sell investors a percentage of their newly-issued currency in exchange for fiat money, such as euro or dollars, or more established virtual currencies such as Bitcoin. 

Reference being made to the draft rulebook, which was issued as part of the consultation document, states that it will be initially required that such schemes be structured as an open-ended investment company with variable share capital (generally known as the SICAV) or as a closed-ended investment company with fixed share capital (generally known as the INVCO) under the laws of Malta. The SICAV structure is the legal vehicle preferred by the majority of promoters who are seeking to set up a Malta Fund structure.

It is also worth highlighting a section from the consultation document, that the MFSA’s initial position is to solely allow for collective investment schemes set up as Professional Investor Funds (PIF) with their investment objective as having the investment in virtual currencies. In parallel, the MFSA has also stated that it is also looking at the possibility of extending this to Alternative Investment Funds (AIF) and Notified Alternative Investment Funds (NAIF)

Shortly after the launch of the consultation process, the MFSA issued a notice referring the industry to the ICO statements issued by ESMA (the European Securities and Markets Authority) relating to the risks posed by the Initial Coin Offerings to Investors and Investment firms.

The 11th of January will bring a close to the discussion paper consultation period which formally kick-started the process for the regulation of collective investment schemes having as their investment objective the investment in virtual currencies. 

The Malta Financial Service Authority (the ‘MFSA’), Malta’s regulator for the Financial Services industry, published the consultation document back in November, consultation on the proposed regulation of Collective Investment schemes investing in virtual currencies.

The MFSA is hoping its discussion paper on Initial Coin Offerings, Virtual Currencies and related Service Providers will lead to a policy framework that supports virtual currencies and related technologies while ensuring effective protection for investors, financial market integrity and stability. 

Virtual currencies such as bitcoin are forms of digital money. Initial Coin Offerings are essentially forms of cryptocurrency crowdfunding, whereby start-ups sell investors a percentage of their newly-issued currency in exchange for fiat money, such as euro or dollars, or more established virtual currencies such as Bitcoin. 

Reference being made to the draft rulebook, which was issued as part of the consultation document, states that it will be initially required that such schemes be structured as an open-ended investment company with variable share capital (generally known as the SICAV) or as a closed-ended investment company with fixed share capital (generally known as the INVCO) under the laws of Malta. The SICAV structure is the legal vehicle preferred by the majority of promoters who are seeking to set up a Malta Fund structure.

It is also worth highlighting a section from the consultation document, that the MFSA’s initial position is to solely allow for collective investment schemes set up as Professional Investor Funds (PIF) with their investment objective as having the investment in virtual currencies. In parallel, the MFSA has also stated that it is also looking at the possibility of extending this to Alternative Investment Funds (AIF) and Notified Alternative Investment Funds (NAIF)

Shortly after the launch of the consultation process, the MFSA refers the industry to the ICO statements issued by ESMA (the European Securities and Markets Authority) relating to the risks posed by the Initial Coin Offerings to Investors and Investment firms.

Should you require further information on collective investment schemes in Malta please do not hesitate to contact us.