Crypto License in Malta
Malta was the first country in Europe to adopt legislation on cryptocurrency at the national level, attracting to the island the world’s largest cryptocurrency exchanges.
Malta has developed a legal framework to regulate various forms of virtual financial assets (VFA) and services related to virtual financial assets (also referred to as VFA services). Cryptocurrency companies are governed by three laws:
- Law on Innovative Technology Agreements and Services (ITAS Law), which provides for registration of technology service providers and certification of technology agreements.
- The Virtual Financial Assets Act (VFAA), which is responsible for regulating VFA service providers, the primary supply of coins (ICO) and VFA agents.
- Malta’s Digital Innovation Act (MDIA Act), which regulates the Malta Digital Innovation Authority (MDIA)
As stipulated by VFAA, no organization is allowed to offer VFA services in or outside Malta without a licence from the Malta Financial Services Authority.
Malta crypto license
COST OF CRYPTOCURRENCY LICENSE
PACKAGE «COMPANY & CRYPTO LICENSE IN MALTA»
- Collection and review of due diligence documents
- Structuring, legal and regulatory advice
- Provision of a legal opinion classifying the legal nature of the service provided
- Drafting of the documents required for application and issue of license
- Business Plan
- Application Form
- Compliance Procedures Manual
- PMLFT Manual
- Conflict of Interest Policy
- Client Categorisation Policy
- Client Order Execution Policy
- Complaints Handling Procedures Manual
- Personal Transactions Policy
- Reporting of Breaches Policy
- Inducements Policy
- Remuneration Policy
- Business Continuity Plan
- Outsourcing Policy
- Emergency Plan
- Preparation of all the supporting documentation for the application.
Requirements for the company
Service providers must meet the following requirements before applying for and obtaining a license to exchange cryptocurrency.
- The applicant’s minimum statutory capital should be 730,000 euros.
- The applicant company has a physical office in Malta.
- Director, top management of the company, KYC/AML officer must comply with the requirements of the regulator
- At least two persons must hold the positions of directors or board of directors of the company.
- Presence of AML/KYC officer
Financial licenses are divided into four classes. Cryptovirges fall into the fourth category, which covers all provisions of VFA service and the control or storage of clients’ funds in connection with the provision of VFA service.
Upon application for a cryptocurrency license in Malta, the company is required to pay a duty of 24,000 euros.
A licensed cryptocurrency company, which assumes the custody of clients’ funds, must appoint a custodian – a credit organization or a bank. All items must be stored in FIAT.
Protection of clients’ assets
Each VFA exchange must implement management mechanisms to protect its clients’ assets. The VFA Exchange must appoint an official with sufficient skills and authority to be responsible for matters related to compliance and obligations to protect the assets of clients.
Taxation of cryptocurrency companies in Malta
The profits derived from crypto activities are the profits of the company. The corporate profit tax on a crypto company in Malta is 35 per cent and is paid to the relevant tax authorities by the licensee on the profits derived from the provision of services. It is important to note that a number of tax exemptions can be applied in each specific case, thereby reducing the corporate tax payable. Read more about Malta crypto tax.
Licensed cryptocurrency companies are required to provide an external auditor’s report at least once a year under section 50 (6) of the VFAA Act. The fee for processing the system audit report in MDIA is EUR 3,000.
Annual license fee
The cost of a cryptocurrency exchange license in Malta also includes an annual surveillance fee. A company holding a cryptocurrency license must pay an annual surveillance fee to MFSA, which will depend on the revenue received by the licensee as follows:
- with a maximum of €1,000,000, the annual supervisory fee will be €50,000.
- with a profit exceeding €1,000,000 – an additional €5,000 for each €1,000,000 profit.
To date, fewer than 20 companies have received cryptocurrency licenses in Malta.
First European country to adopt crypto legislation
Prestige and worldwide recognition of the jurisdiction
Progressive state approach to cryptocurrencies
VAT does not apply to cryptocurrency exchange transactions
CRYPTO REGULATION IN MALTA
Malta has a strongly progressive approach to cryptocurrency, positioning itself as the world leader in the regulation of cryptocurrencies. Regardless of the fact that cryptocurrencies are not a legal tender in Malta, the government appoints it as a «means of exchange, unit of account or savings». Adding to the existing POD/FT legislation, the Government of Malta was the first to apply three Digital Assets Acts (MDIA, ITAS and VFA), as well as blockchain legislation. Malta’s cryptocurrency regulation does not include specific tax legislation, and currently VAT does not apply to transactions for exchange of fiat currency to cryptocurrency.
Cryptocurrency exchange is legal in Malta, and in 2018 the Maltese government passed landmark legislation that defined a new regulatory framework for cryptocurrencies and solved the problems of POD/FT. This regulation of Malta’s cryptocurrency includes several accounts, including the Virtual Financial Assets Act (VFA), which sets a global precedent by establishing a regulatory regime applicable to cryptocurrency exchanges, ICOs, brokers, wallet suppliers, Consultants and asset managers.
VFA (since November 2018) was accompanied by the Law on Innovative Technologies and Services, which established a regime for future registration and reporting of crypto service providers. Malta’s Digital Innovation Authority was also established: MDIA is the government body responsible for the development of cryptocurrency policy, cooperation with other countries and organizations and ensuring ethical standards for the use of cryptocurrency and blockchain technologies.
Malta Cryptocurrency Regulations
There is no as new money-laundering legislation or cryptocurrency is envisaged as the Office of Malta Financial Services (MFSA) stated in its Strategic Plan for 2019-2021 that the country’s financial services regulator will actively monitor and manage businessRisks associated with licensed virtual assets and business cryptocurrency to better combat money laundering and other financial crime risks. The Government of Malta also indicated that it would focus on integrating AI with cryptocurrency regulation and could introduce specific guidelines for security token proposals.
Current Maltese legislation
The VFA Act provides a framework for virtual financial assets, including ICOs, and entities that deal with them, such as virtual asset exchanges, investment advisers, purse-purse providers, brokers and portfolio managers.
Malta has adopted a financial instrument test that must be conducted by any person proposing to issue an ICO in Malta or from Malta to determine the type of asset created and the law applicable to the ICO and the token itself. If this asset is defined as a «virtual financial asset» or «VFA» (defined as any form of digital record medium that is used as a digital medium, unit of account or savings other than a financial instrument, virtual token or electronic money) will be regulated by the VFA Act.
- Financial instrument – a financial instrument is defined in accordance with the EU Financial Services Market Directive (MiFID) and the Malta Investment Services Act, while activities related to financial instruments are regulated by the Investment Services Act;
- A virtual token is a token whose utility, value or use is limited solely to the acquisition of goods or services or to the exclusively distributed platform of the registry on which or to which it was issued, or within a limited network of distributed platforms. Virtual tokens are typically service tokens whose only utility and value is to purchase goods or services on the DLT platform on which they are released. Activities related to virtual markers are not regulated; And finally,
- Electronic money – to be considered electronic money, a DLT-asset must be issued at a nominal value upon receipt of funds by the issuer and can be redeemed at any time only by the issuer. It should be used to make payments and should be accepted by a non-issuer as a means of payment.
If the DLT asset can be converted into another DLT, it will be treated as the type of DLT asset that it can be converted into. Typically, most virtual assets are virtual financial assets.
The main difference compared to Hong Kong is that there is currently no specific legislation applicable to ICOs or virtual assets in Hong Kong. However, this will change if, in November 2020, FSTB proposes to license virtual asset exchanges under Hong Kong’s anti-money-laundering legislation. In addition, there is no strict distinction between different types of tokens in Hong Kong, except where tokens have security characteristics. Otherwise, all tokens are considered virtual goods.
Requirements for the content of the technical description
The DFA Act does not require issuers to obtain a license or to register with the MFA, but they must issue a technical document that meets the various requirements specified in the DFA Act. This requirement applies to any legal entity that proposes (i) to offer a virtual financial asset to the public in or from Malta or (ii) to apply to trading a virtual financial asset on the DLT exchange. The definition of the VFA issuer refers only to legal entities established under Maltese law. Thus, issuers must be registered in Malta if they wish to host a VFA (i.e. ICO). A technical document is not required if the DLT asset is defined as a virtual token (which is not regulated by VFA). VAIOT announced the successful registration of its technical document with the MFSA in October 2020, becoming the first project regulated by the VFA Act.
VFA issuers are obliged to comply with the issuer’s obligations, which, very briefly, relate to the conduct of business honestly and conscientiously, with due qualifications, care and diligence; investor relations, conflicts of interest, investor protection, administrative mechanisms, safety and compliance with POD/FT.
Issuers will be liable for compensation to any person who incurs losses as a result of the purchase of virtual financial assets either on the original VFA proposal or in the exchange of DLT on the basis of false information contained in an official document on the website issuer. or advertising virtual financial assets.
This is comparable to the FCS regulatory approach, under which investor protection measures under the FCS Code of Conduct apply only to the participation of a traditional intermediary and because the FCS Code of Conduct does not apply to securities issuers, The Code of Conduct contains no obligations. The behaviour of the issuer in a typical offer of security markers to ensure the accuracy of the information presented in its marketing documents, as well as to assess the suitability of its markers for potential buyers. However, an issuer who makes false or misleading statements in its official document may be held liable for fraud, theft or misrepresentation.
Requirements for VFA Agent
In Malta, the issuer of the ICO must permanently appoint a VFA agent approved by the MFSA. Lawyers, accountants and corporate service providers can apply for approval as an AFW agent. The VFA agent is responsible for advising and directing the issuer regarding its responsibilities and obligations under the VFA Act and relevant rules and regulations. It should assume that the issuer has complied with all applicable regulatory requirements for the supply of virtual financial assets or their admission to the exchange (where appropriate), and should consider the issuer appropriate and appropriate. The DFA agent acts as a liaison between the issuer and the MFA and must provide all documentation required under the VFA Act and relevant rules and regulations. In particular, it must annually submit to IFSA a certificate of conformity confirming that the issuer is in compliance with regulatory requirements. VFA agents are required to disclose any material information about non-compliance with IFAS rules.
Advertising requirements for VFA
The VFA Act lays down advertising requirements for an initial VFA proposal or VFA admission. Any advertisement must be clearly identified as such and the information contained therein must be accurate and not misleading and must be consistent with the information contained (or contained) in an official document. The announcement should contain a statement that an official document has been or will be issued, as well as the address and time when the copies will be or will be available to the public. Advertising related to the VFA service can be issued only by the VFA license holder or another person whose content has been verified and approved by the license holder’s administrative board.
VFA Service Providers
Providing VFA services in Malta or from Malta requires the provider to license MFSA. Examples of VFA services include portfolio management, nominal custodian services, investment advice on virtual financial assets, virtual placement of financial assets, VFA exchange management, order reception and transfer, related to virtual financial assets, execution of orders and transactions with them.
Crypto regulation in Malta
|Period for consideration
||up to 9 months||Annual fee for supervision||50,000 €|
|State fee for application
||24,000 €||Local staff member||At least 3|
|Required share capital||up to 730,000 €||Physical office||Required|
|Corporate income tax||35%||Accounting audit||Required|
Malta crypto license application
An organization applying for a VFA license must appoint a registered VFA agent to apply. The MFA may issue or refuse to issue a license that may be general in nature or limited to the provision of certain services to the VFA. Granting a license requires MFSA to continuously confirm that:
- The applicant (and its beneficial owner, qualified owner, members of the administrative board or any other person who manages the business of the applicant) is suitable and suitable for providing appropriate services to the VFA and comply with and comply with the requirements of the VFA Act and other relevant regulations and rules;
- If the applicant is a natural person, the person is a resident of Malta;
- If the applicant is a legal person, it is either established in Malta or in accordance with Maltese law or recognized jurisdiction and has a branch in Malta. Its goals or objectives should be limited to activities as a licensee and to the performance of ancillary or secondary activities and should not include goals or objectives that are incompatible with the services of the licensee’s VFA. Incompatible objectives or facilities include any activity that requires authorization by the MFA under any Maltese legislation, except the VFA Act; and
- Its actual activities are compatible and related to VFA services.
A license may be issued under any conditions deemed appropriate by the MFA and may subsequently be revoked or additional conditions may be imposed. Decisions of the Ministry of Foreign Affairs to grant or refuse a license will be based on its objectives of protecting investors and the public, protecting the reputation of Malta, promoting innovation and competition, and maintaining the reputation of the applicant and related parties.
There are a number of other grounds on which the Ministry of Foreign Affairs may refuse to grant a license, including if it considers that the applicant lacks sound and reasonable management, reliable administrative mechanisms and adequate internal control or security mechanisms, or that the applicant to enter into a relationship with any person or persons that prevent him from exercising effective supervision of the applicant or that granting a license to the applicant may pose a risk to investors, the general public, Malta’s reputation and the promotion of innovation or competition.
The MFSA may suspend or revoke a license for reasons including, inter alia:
- The licensee must not provide services to the WFA within 12 months from the date of issue of the license;
- If the licensee is declared bankrupt, liquidated or enters into a settlement agreement with its creditors or is otherwise liquidated. or
- at the written request of another competent regulatory body regulating the issuance of a license.
License holder’s responsibilities
The VFA Act imposes standards of conduct on licensee holders, including requirements that they act fairly, fairly and professionally; comply with the VFA Act and any related rules and regulations; and have fiduciary responsibilities towards their customers. license holders must maintain secure access systems and protocols to high standards.
Market abuse prevention
The VFA Act criminalizes insider trading, market manipulation and the unlawful disclosure of internal information with respect to virtual financial assets that are allowed to be traded on VFA, whether they are carried out in or outside Malta:
- Insider transactions – knowingly recommending or encouraging another person to participate in insider transactions is an offense. Insider transactions occur when a person possesses insider information and uses that information, at his or her own expense or at the expense of a third party, directly or indirectly, to the virtual financial assets to which that information relates. This also occurs when a person possesses insider information and, on the basis of that information, recommends or induces another person to acquire or dispose of the virtual financial assets to which the information relates, or another person to revoke or amend an order relating to the virtual financial asset to which the information relates,
- Unlawful disclosure of insider information where a person possesses insider information and discloses that information to any other person, except where disclosure is permitted under the VFA Act and regulations or rules issued pursuant thereto. Incitement, aiding and abetting
or instigating such a crime is also an offense.
- Market manipulation is defined as manipulating or attempting to manipulate a virtual financial asset or benchmark through an abusive strategy.
VFA exchanges must have effective systems, procedures and mechanisms to monitor and detect abuse in the market and must report any suspicion of abuse in the market to MFSA.
License holder audit
The licensee will be required to appoint an auditor who is required to report to the MFSA any fact or decision that may result in a serious disclaimer or denial in the audit report of the licensee’s accounts, or may constitute a material breach of applicable legislative or regulatory requirements, or a +limit of the licensee’s ability to continue to operate. Any person with close ties to such a licensee must also be reported by the auditor to the MFSA. The auditor must simultaneously communicate the information to the board of the licensee if the auditor is not aware of a valid reason for not doing so. The auditor is required to report annually to the MFSA on the security systems and protocols of the licensee.
It is an offense to induce or attempt to induce another person to enter into a VFA agreement through deliberately misleading, false or misleading statements. Any person who deliberately prevents another person from exercising the rights granted by the VFA Act will also be guilty of an offense. Offenses under the VFA Act are punishable by a fine of up to 15 million euros, a fine of up to three times the profit or loss avoided as a result of the crime, or imprisonment for up to six years, or a fine and imprisonment at the same time. Law VFA also imposes obligations to report suspicions of money laundering and terrorist financing. If the official or employee of the VFA issuer, the VFA agent or the licensee believes that the transaction may be related to money laundering or terrorist financing.
FREQUENTLY ASKED QUESTIONS
Does Malta grant a licence for crypto activities?Yes. In Malta, a crypto license is formally called a Virtual Financial Assets License (VFA). It comes in four classes, or levels. In order to establish a crypto company in Malta, VFAA Class 4 license is required. .
How do I get a crypto license in Malta?In order to obtain a crypto license in Malta, one must submit all necessary documents and complete the application process lead by Malta Financial Services Authority.
Is it necessary to contact the local tax authority in crypto activities on behalf of a Lithuanian company?Yes. Crypto companies are subject to corporate and other taxes. In order to report their income and pay the taxes, they must contact the State Tax Inspectorate under the Ministry of Finance of the Republic of Lithuania.
Is it necessary to contact the Office of the Commissioner for Revenue in crypto activities on behalf of a Maltese company?Yes. In Malta, the Office of the Commissioner for Revenue is the official tax authority. Profits realised from crypto exchange are subject to corporate tax. However, in certain cases, tax deductions are applicable.
What are the activities of the crypto license in Malta?The VFAA license comes in four classes, or levels: VFAA Class 1 allows the holder to receive and transmit orders and/ or provide investment advice related to virtual assets. VFAA Class 2 allows the holder to provide VFA-related services. But it doesn‘t allow the holder to operate a VFA exchange. VFAA Class 3 allows the holder to provide VFA services. But it doesn‘t allow the holder to operate a VFA exchange. VFAA Class 4 allows the holder to provide a full spectrum of VFA services. This license class also allows the holder to hold or control clients’ assets or money – something that is not included in any of the lower license classes.
How long does it take to get a license?The period between the initial application and the final decision should take between three and four months.
Can non-residents of Malta own a crypto company?Yes. However, physical presence of the owner is required during the application process. In cases where the applicant is a legal entity, it can either be constituted in Malta of abroad. In the latter occurrence, the applicant must register a branch and an office located in Malta.
Can non-residents of Malta be part of the board of a Maltese crypto company?Yes. The board of directors and administrators must consist of a minimum of 2 individuals. At least one of them must have a physical presence in the country.
Is it necessary to have a banking account to obtain a licence?Yes. If the business model of a crypto company involves the custody of assets and investors’ funds, the company needs to appoint a custodian for storing the VFAs. FIAT currencies are to be stored with an authorised bank/credit institution.
What is the minimum authorized capital for a virtual currency service provider?In Malta, crypto exchanges are subject to an initial capital requirement of 730,000 euros.
For how long is a crypto-license issued?The owner of a crypto license must pay an annual renewal fee to retain license validity.
Is it possible to deposit authorized capital in cryptocurrency?No. Authorized capital should be deposited in a FIAT currency.
Why you should get a crypto license in Malta?In the Fintech space, Malta is widely known as a very inviting environment to run a business. Since it is a small country, Malta is relatively quick to update its regulatory network to accommodate industry shifts and innovative concepts as well. Furthermore, unlike a handful of countries in continental Europe, Malta has developed a progressive attitude and approach to cryptocurrencies and blockchain technology. It also has a comprehensive regulatory network for crypto businesses, closely supervising consumer protection, promoting financial stability and creating a level playing field for everyone involved in the industry.
Are Maltese cryptocurrency companies audited?Yes. In addition to appointing an internal auditor and a systems auditor, crypto companies in Malta must submit an external auditor’s report at least once a year.
Can the director of a crypto company be a non-resident of Malta?No. Physical presence in the country is a formal requirement for the director of a crypto company. However, the director can also be a nominal representative.
What measures to prevent money-laundering and the financing of terrorism are in place in Malta?Crypto companies functioning in Malta are formally required to appoint a money laundering reporting officer, a compliance officer and a risk manager. Every license applicant must also submit reports about their AML policies and procedures. Finally, the application must also contain information about the applicant’s due diligence systems and controls related to client onboarding and KYC.
When are measures to prevent money-laundering and the financing of terrorism applied in Malta?These measures are first applied during the application process by requesting the applicant to submit relevant reports and information about their internal practices. Appointed compliance managers also ensure consistent compliance in internal processes on a regular basis.
What difficulties may arise in obtaining a crypto license in Malta?Due to major changes in the regulatory framework in 2018, the MFA has become very selective and meticulous in the process of granting crypto licenses and supervising commercial activities carried out by licensed crypto companies. Class 4 license has become the most complicated to obtain and the process requires thorough preparation.
At the moment, the main services of our company are legal and compliance solutions for FinTech projects. Our offices are located in Tallinn, Vilnius, and Warsaw. The legal team can assist with legal analysis, project structuring, and legal regulation.