Malta cryptolicense: features and requirements

Examine the thorough process for acquiring a cryptolicensing in Malta, accentuating essential prerequisites and distinctive elements.

Upsides of obtaining a license for activities within Malta's cryptocurrency industry

• An adaptable approach for overseeing cutting-edge technological advancements.
• Preserving market integrity and fortifying the financial sector's resilience.
• Respected domain.
• Reasonable tax rates.

If you're mulling over the decision to invest into a crypto asset, keep in mind that while the primary focus of the 5th AML Law is on regulating the mediating functions promoting the conversion of cryptocurrency to fiat currencies, it specifically governs exchanges between them and encompassing solutions suppliers for digital wallet. Malta has implemented a rigorous regulatory system which fully aligns with the criteria put out by the Financial Action Task Force (FATF), thereby guaranteeing meticulous supervision.

• Instead of 'EU's virtual currency,' we'll now adopt the term 'virtual financial asset' (VFA);
• Validating crypto platforms as reputable enterprises within the industry, covered by AML.

Management of blockchain-based monetary structures

Malta led the way by embracing guidelines for implementing blockchain technology. The Maltese legislature has developed three acts that establish regulations for the cryptocurrency industry:

• Malta Digital Innovation Authority Act (MDIA)
• Innovative Technology Arrangements and Services Act (ITAS)
• Virtual Financial Assets Act (VFAA)

The VFAA demands the MFSA to issue VFA certificates to companies offering corresponding services, regardless of location, it covers:

• Accepting and transferring VFAs;
• executing operations for third parties;
• using one's own accounts;
• services of custodian and nominal holder;
• portfolio administration;
• VFA positioning;
• consultations;
• steps for executing VFA exchanges

MDIA regulates DLT and smart contracts, while the MFSA oversees virtual service vendors.

VFA

Digital assets, ICOs, with the participating entities, such as traders, custodial wallet service contractors, investment consultants, and fund administrators, are overseen by an exhaustive regulatory structure. Those considering an ICO in Malta must undergo Financial Instrument Testing (FIT) to ascertain regulatory requirements and asset classification. If the item is deemed a VFA, it is subject to the jurisdiction of the VFAA directives, which specify that it is not classified as electronic currency, virtual tokens, or monetary instruments.

Regulations pertaining to financial products are covered under both the Malta Investment Services Act and the EU Markets in Financial Instruments Directive (MiFID). Activities pertaining to these instruments are specifically governed under the Investment Services Act.

To qualify as electronic currency, a distributed ledger technology asset must be issued at its face value, and the provider must swiftly facilitate the redemption of all received funds. They are mainly employed for monetary transactions, with VFAs being a widely used category.

Acquiring a cryptocurrency license: the functions of MFSA and MDIA

The MFSA, Malta's exclusive monetary regulatory authority, has oversight over a range of sectors, encompassing investment services, stock markets, insurance entities, and monetary establishments. It persistently observes and awards licenses to crypto entities operating on the island since 2018. By creating an atmosphere that is supportive of creativity, the MFSA set up its "FinTech normative sandbox," which permits testing out novel business ideas.

The procedure for securing a Maltese cryptolicense

1. Company enrollment.
2. Seek out local administrators and accredited regional authorities as needed.
3. The elaboration of guidelines, statutes, and ownership share issues.
4. Establishing a bank account appropriate for crypto dealings.
5. Open a trade account to receive credit and debit cards.
6. Business strategy, budgetary summaries and anticipations.
7. Creation of an AML policy and the "Know Your Client" guidelines.
8. Creating the Malta VFA license request.
9. Advocacy in representation of clients before financial institutions, liquidity providers, and licensing agencies.

Features of the Maltese cryptolicensing

After completing the qualifying exam, any individual can secure a license for engaging in cryptocurrency operations:

• Proficiency testing;
• Remaining in-country;
• Hiring of a local VFA representative;
• Proof that financial products comply with all prerequisites;
• Fulfilling the criteria for sufficient funds and liquidity.

Malta was among the early adopters in creating an extensive and fully compliant AML structure for firms aiming to issue tokens and offer VFA services.

• Individuals with a 10% or greater direct/indirect interest in the firm;
• The Board members;
• Senior manager;
• Law enforcement responsible for AML/CTF conformance and the Money Laundering Reporting Office (MLRO);
• Risk manager;
• Other individuals, properly running the VFA enterprise

Features and criteria for a Maltese cryptolicense

Throughout the license application process, a corporate entity must conform to specified legal mandates:

1. Set up a Maltese branch office
2. All ultimate beneficial owners, directors, senior management, and shareholders must undergo compliance testing.
3. The recommended service must adhere to the description outlined in the VFAA. It's equally crucial to select a VFA representative who will act as your link with the MFSA and assist with your submission. The representative must successfully complete a FIT assessment.
4. Two or more individuals must assume functions and seats on the executive committee.
5. To uphold AML standards, the candidate must designate a risk manager, compliance officer, and reporting team.
6. Deposit the obligatory minimum capital.

Cryptocurrency licensing in Maltese jurisdiction: varieties of permits

There exist four types of non-cryptographic permits in the jurisdiction.

Malta's minimal list of mandated paperwork for a cryptolicense

• Application form for MFSA;
• Accurately completed documents addressed to top executives, directors, equity holders, conformance experts, MLRO;
• MLRO accreditation and compliance officer's expertise;
• Business plan and forecast for the next 3-year period;
• Auditor's assessment document;
• Legal conclusion;
• Internal procedures by AML/CTF;
• A copy of the professional liability insurance agreement;
• Approaches for recuperation and sustaining business operations.

Taxation on cryptocurrency enterprises

Firms in Malta engaged in VFA operations and possessing cryptocurrency trading licenses may face income tax requirements, without a unified law governing the taxation of digital currency transactions. The nation enforces a corporate taxation level of 35%, yet it may undergo significant reduction.

Conclusion

Malta has shown leadership in DLT development, utilizing its technological strength. It has earned industry recognition for integrating advanced blockchains and DLT developments under regulatory oversight. To enhance AML/CTF compliance, Malta enacted three laws outlining frameworks for cryptocurrencies and decentralized networks.

To thwart monetary wrongdoing and illicit activities, the MFSA pledged to vigilantly examine business risks linked with authorized virtual platforms. The government is also looking at incorporating artificial intelligence into laws pertaining to digital tokens and creating distinct procedures for investment token offerings.

To obtain thorough advice and in-depth knowledge of Malta's cryptocurrency laws, it is strongly advised to speak with the knowledgeable specialists at TK Deal. Their vast experience and proficiency in maneuvering through the complex regulatory environment guarantees that you will receive customized guidance and solutions that are matched to your unique requirements and goals.