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Malta - a Crypto Friendly Jurisdiction

By Teodor | Circular Economy Projects | 17 Apr 2020


Malta is a small nation that has many of talented people and investors who are eager to enter the cryptocurrency and blockchain market. In Malta cryptocurrencies are not legal tender but they are recognized by the government as a: 

- medium of exchange, 

- unit of account, or

- store of value. 

Malta has no specific cryptocurrency tax legislation, nor is VAT currently applicable to exchanging fiat currency for crypto coins. 

The first big step toward cryptocurrencies in Malta was made in October 2017, when the government issued a consultation document that proposed a regulatory framework for collective investment schemes and investment in cryptocurrencies. As a result of the consultation, Malta Financial Services Authority (MFSA) published conditions that apply to professional investor funds that invest in cryptocurrencies, in January 22 and 29, 2018.

Since 2018, Malta has taken significant steps toward becoming a “Blockchain Island”, as desired by the country leaders. 

In June 2018, the island nation’s Parliament has passed 3 Bills regarding cryptocurrencies, blockchain and the distributed ledger technology (DLT), marking it as one of the first jurisdictions in the world to pass specific legislation. 

The three bills (43,44,45) are titled: 

- Bill #43 The Innovative Technology Arrangements and Services Act; 

- Bill #44 The Virtual Financial Assets Act; 

- Bill #45 The Malta Digital Innovation Authority Act

The Malta Digital Innovation Authority Act  (MDIA) — The act allowed for the formation of the Malta Digital Innovation Authority. Their priority is not just to help regulate— but to promote— the crypto economy in Malta. 

The Innovative Technology Arrangements and Services Act (ITASA) — The ITASA provides legal clarity on many aspects of blockchain technology. Through definition criteria and guiding principles, it will help developers certify the quality and governance of blockchain technology used by companies who seek the approval of domestic operation.

The Virtual Financial Assets Act (VFAA) — This act founds the regulatory structure for all entities that work with virtual financial assets, including all aspects of Security Token Offerings (STOs). In a similar manner to the US SEC’s Howey Test, the VFAA has authorized a financial instruments test which they will use to determine whether or not an offering constitutes a security. Additionally, all token offerings must follow strict rules established by the VFAA, prior to going live.<br></p><p>Since then Malta made big stept toward crypto and blockchain, allowing many entrepreneurs starting their businesses there, from small crypto project to big exchanges, conferences and more. 

Security Tokens Offering (STO) Regulation in Malta

As Malta belongs to the European Union, EU regulation MiFID II covers security tokens, defining them as transferable securities (most security tokens do fall into this asset category). The conclusion is that newly issued security tokens need to fulfill the requirements of the Prospectus Directive and issuers have to submit a prospectus to the financial regulator of the country where the STO happens. 

According to MiFID II, threshold below which a prospectus is not required in Malta is 5 million EUR. However, for offers below 5 million EUR, an issuer may seek admission to trading on the Prospects MTF, operated by the Malta Stock Exchange. In this case, the issuer must prepare an Admission Document for review and approval by the Malta Stock Exchange. 

Opening a Company in Malta 

  • Register a Malta-based company with the Malta Financial Services Authority (MFSA) and receive all the necessary documents within 48 hours! 
  • The minimum share capital of a Malta company is €1,165, which may be only 20% paid up. 
  • Registration fees are comparatively low in Malta, starting from €245 for a company with a minimum share capital. 
  • A Malta-based private company requires a local registered office, at least one director and one company secretary, and is usually incorporated with 2 shareholders to enable the company to provide more than one activity. Shareholders may be screened by appointing a fiduciary company to act on their behalf, which ensures complete confidentiality. 
  • The renewal of the registration of a Malta company occurs on an annual basis. 
  • Malta-based companies are required to prepare and submit financial statements (which should also be audited).

 

References: 

Image by Gordon Johnson, Pixabay: https://pixabay.com/users/GDJ-1086657/?utm_source=link-attribution&amp;utm_medium=referral&amp;utm_campaign=image&amp;utm_content=1758835

MiFIID II: https://www.esma.europa.eu/policy-rules/mifid-ii-and-mifir
Parliament Bills: https://www.coindesk.com/malta-passes-three-bills-on-blockchain-and-crypto-assets

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Teodor
Teodor

Strong Family man and Christian believer, entrepreneur involved in AI, Web3.0 apps development, and in crypto investment.


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