Eighteen months ago, Malta passed into law the world’s first pro blockchain and cryptocurrency legislation. This led to it being christened as “The Blockchain Island” and it becoming home to some of the world’s largest and most innovative blockchain and crypto companies.
Whilst many other countries have skirted around regulating this dynamic industry, Malta has sought to regulate and provide clarity through its licensing system. This has resulted in legal certainty, increased trust, and immense opportunity for any blockchain or crypto businesses looking for an EU base.
There are four Virtual Financial Asset Licenses available and they cover eight VFA services that are defined by the VFA Act. These services include: reception and transmission of orders, execution of orders on behalf of third parties, dealing on own account, portfolio management, custodian or nominee services, investment advice, placing of VFAs, and the operation of a VFA exchange.
Class 1 Licence
Entities in possession of a Class 1 VFA License issued in terms of the VFA Act, are authorised to provide three of the VFA services as defined by the Maltese authorities. These are the reception and transmission of orders, placement of VFAs and provision of investment advice.
Those wishing to apply for a Class 1 VFA licence are required to have either an initial capital requirement of EUR 50,000 or a share capital of EUR 25,000 plus a Professional Indemnity Insurance. The licensee will also be required to pay an annual supervisory fee of EUR 5,500 for the first EUR 50,000 or revenue, increasing by EUR 700 for each additional EUR 50,000 of annual turnover.
Class 2 Licence
A Class 2 licence authorises the holder to provide all VFA services contemplated by the VFA Act, except for dealing on own account and operating a VFA exchange. The initial capital requirement for licence type is
Services covered by the Class 2 License include execution of orders on behalf of a third party, custodian and nominee services, the reception and transmission of orders, portfolio management, investment advice, and placing of VFAs.
EUR 125,000. The prescribed annual supervisory fees amount to EUR 9,000 in, for the first EUR 250,000 of revenue, increasing by a further EUR 800 for each additional EUR 250,000.
Class 3 Licence
Holders of a Class 3 License are authorised to carry out all VFA services, except for operating an exchange. The initial capital requirements for this Class are higher at EUR 730,000, with an annual supervisory fee of EUR 12,000 for revenue of up to EUR 250,000. For every additional EUR 250,000 revenue tranche, a further supervisory fee of EUR 800 is applicable.
Class 4 License
A Class 4 License allows the holder to operate all the eight services prescribed by the VFA Act. The capital requirement is the same as with a Class 3 licence, that is- EUR 730,000. However, the annual supervisory fee is EUR 50,000 per year for revenue up to EUR 1,000,000. Every EUR 1,000,000 of revenue thereafter requires the payment of an additional fee of EUR 5,000 per year.
BDO Fintech Advisory Limited is one of the first entities in Malta to receive a licence to operate as a Virtual Financial Assets Agent, under Malta’s VFA regulatory framework. This means that BDO is able to assist both VFA service providers in obtaining any of the four licenses that are required to operate within this regulated space.
In addition, being a licenced MDIA Systems Auditor, BDO Technology Advisory Ltd, can also provide Systems Audit services.
Through the other affiliated entities, BDO can provide tax advisory, legal services for companies looking to set up a local blockchain or DLT business, ongoing compliance, accounting and audit.
Get in touch with our VFA Agent Advisory Team to learn more today.