MFSA and MDIA Issue Joint Consultation on VFA Service Providers

 

The Malta Financial Services Authority and the Malta Digital Innovation Authority have jointly issued a consultation document aimed at obtaining industry feedback regarding the proposed adoption of an Innovative Technology Arrangement (ITA) certification. This new requirement may affect applicants seeking a Virtual Financial Assets (VFA) service licence and those already holding a licence in Malta.

 

The document brings forth the consideration that Distributed Ledger Technology (DLT) is often viewed as a system that brings high technological risks. Hence, the document proposes to implement a system audit based ITA certification, which would be entrusted to the MDIA. This proposal is intended to provide an extra layer of security and regulatory assurance when dealing with DLT.

 

Where a VFA license holder does not utilise ITAs, it is to seek MDIA approval and a decision will constitute sufficient evidence for the MFSA. Those applicants still in the process of obtaining a VFA licence are to either present the MFSA an approval by the MDIA showing that they do not have an ITA in place, or if the applicant has an ITA as part of its operations, the entity will be required to submit a Systems Audit Report. The timeframe for both decisions is of 3 months from obtaining the licence.

 

Should this consultation document gain effect, it will be transposed into Chapter 3 of the VFA Rulebook and will apply immediately. Since this ITA certification would be a new requirement, fees would be waived for the first 2 years.

 

Should the MDIA certification become an essential part of the VFA licensing conditions, a failure to obtain such certification will result in the licence either not being granted or, if the entity already has a license, the MFSA may require Licence Holders to terminate operations. The consultation period will remain open until 30th March 2021.