As we are getting closer to the date that the Virtual Financial Asset Bill will be voted from the Maltese Parliament, a lot of professionals are wondering what the next steps will be in the adoption process. Here’s 8 keypoints for a VFA license in Malta.
Let’s see some key points of the VFA Bill:
1) Initial VFA offerings
To kick off an offering you need a white paper and a VFA agent who is going to approve the content of the offering and submit it to the competent authority. There are specific rules on what a white paper should include from a financial and business perspective. There are also anti-hyping rules on how an ICO should be advertised.
2) Get listed on a VFA or DLT Exchange
To get your ICO listed and publicly traded in a DTL exchange, you need to comply with all the applicable requirements as prescribed in the Act and any regulations made and Rules issued thereunder as long as such VFAs remain admitted to trading.
3) Obtain a VFA License for Services
A VFA license for the provision of VFA services can be granted on specific areas such as the reception and transmission of orders, portfolio management, nominee service, marketing of financial assets and the operation of a VFA exchange.
In any case, the role of the VFA Agent who is going to submit the application is critical in a regulatory and practical matter. Later when the license is issued and effective, the agent and the holder should comply with several aspects of the bill, one of each is that the service licenses should not be provided under a single entity, so a portfolio management company can not be a broker at the same time, which is in favor of governance, transparency and the elimination of conflicts of interest.
4) The white paper
Well as in every idea, everything starts with a white paper. VFA Bill goes deep into that by providing guidance on how to publish a n appropriate white paper, signed by all members of the issuer’s board and the VFA agent, which would include information such as for the product, the management, the pitching strategy and the financial plan.
Our view is that the white paper is a measure to audit the companies at a later stage and review if the promises have been kept, otherwise the license will be rigorously revoked. Apparently, this is for the interest of the issuer and the market.
5) Corporate structuring
To apply for a VFA license, you need the basic staff that every company has, such a Memorandum and Articles of Association, a company number, a TIN and most importantly a bank account. To set up all of these you need time and some decisions such as the board of directors might be important in the future.
From a regulatory perspective the application will require a set of documents, dully signed and notarized. Opposite to an MGA license KYC at the level of the beneficiaries is not required, although there could be similar provisions later on.
6) Prevention of Market Abuse
VFA Bill is very keen on protecting the efficiency of the market by setting several rules around inside trading, disclosure of information and market manipulation. For this purpose, the law is enforcing VFA exchanges to monitor trading activities and seek to detect cases of market abuse.
7) The role of the auditor
In an extra effort to enforce governance and financial transparency, the license holders should appoint an auditor who is going to report to Malta Digital Innovation Authority any deviation from the law. The auditor should report annually on the license holder’s systems and security access protocols in the manner and format required by the Authority.
8) Connecting to the world of Fiat
Although this is in principle the reason why the VFA scheme could turn out to be a big success, it is pretty much self-fulfilling. Financial institutions in Malta such as the Bank of Valletta should carry business with VFA Agents as usual. If the holders suffer difficulties to open and operate a bank account, this VFA economy will not work, simply because it is heavily relied on fiat currency in ordinary business transactions.