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MFSA Fintech Strategy - Regulation

Josef Mercieca , Tax Partner |

10 July 2019


Following the release of its Fintech Strategy in May 2019, the Malta Financial Services Authority (MFSA) is releasing information regarding each of the six pillars and focusing on the implementation of the strategic objectives.

Through the first pillar, Regulations, the MFSA published a consultation document:

  • Proposing an MFSA Regulatory Sandbox, which will encourage Fintech innovation
  • Introducing further endeavours in relation to Regulatory Technologies (RegTech) and Supervisory Technologies (SupTech).

Recently, several jurisdictions established Regulatory Sandboxes - environments that support and facilitate innovation whilst safeguarding consumer protection, market integrity and financial soundness.

Malta is already offering a business environment conducive to financial technology innovation, especially in the Distributed Ledger Technology (DLT) sphere as evident from the implementation of the Virtual Financial Assets (VFA) Framework. The MFSA is now proposing to set up a Regulatory Sandbox to further support technology enabled financial innovation.

The MFSA Regulatory Sandbox will provide the opportunity for participants to test the commercial and regulatory viability of their innovations for a specified period of time in a fully functional financial services environment, under a set of conditions, in order to strictly contain the associated risks to consumers and the financial system.

This testing environment will not only cater for financial services falling under the MFSA’s regulatory and supervisory perimeter, but also for those services that do not clearly fall under specific financial services legislation. Additionally, the Regulatory Sandbox will cater for other products and services which enable or facilitate the provision of such financial services, such as solutions pertinent to Customer Due Diligence (CDD), Know Your Customer (KYC), Anti-Money Laundering (AML), RegTech and SupTech.

Therefore, the Regulatory Sandbox will be useful for both established financial services providers and new entrants, including start-ups, scale ups and technology firms, leveraging existing or new disruptive technology in an innovative way to provide or support the provision of a financial services offering.



The primary objectives of the Sandbox are to support sustainable financial innovation and to reduce regulatory uncertainty.

These will be achieved through the following principles:

  1. Fostering innovation
  2. Ensuring effective investor and consumer protection
  3. Enhancing firms’ understanding of regulatory expectations
  4. Knowledge sharing


Scope & Applicability

It is being proposed that the Regulatory Sandbox will be open to all Fintech entities which is defined by the European Banking Authority (EBA) as “technologically enabled financial innovation that could result in new business models, applications, processes or products with an associated material effect on financial markets and institutions and the provision of financial services”.

Therefore, it is envisaged that three types of technology enabled financial innovation will be within scope of the MFSA Regulatory Sandbox:

  • Product Innovation
  • Process Innovation
  • Institutional Innovation


Download the MFSA Fintech Strategy Consultation document.


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