The Malta Financial Services Authority (MFSA) published a position paper on 12 June 2025 outlining its stance on the tokenisation of units or shares in Collective Investment Schemes (CIS). The paper is part of Malta's efforts to align with the European Union’s broader digital finance agenda, particularly the Markets in Crypto-Assets Regulation (MiCA) and the DLT Pilot Regime.
Introduction to MFSA's Tokenisation Framework
The MFSA defines tokenisation as the representation of CIS units on distributed ledger technology (DLT), either as native tokens issued directly on a blockchain or non-native tokens acting as digital proxies for off-chain assets. The MFSA emphasized that tokenisation does not change the legal nature of the units, which continue to be regulated under the Markets in Financial Instruments Directive (MiFID II) and not under MiCA.The paper confirms that tokenisation is permissible for various fund types including licensed Alternative Investment Funds (AIFs), licensed and notified Professional Investor Funds (PIFs) and Undertakings for Collective Investment in Transferable Securities (UCITS), provided regulatory safeguards remain intact.
In tokenised structures, transfer agents or fund administrators are responsible for maintaining blockchain-based share registers, managing subscriptions and redemptions via smart contracts, and ensuring investor identities and wallets comply with Anti-Money Laundering and Know Your Customer requirements. Custodians or depositaries must clarify how tokenised units will be held and safeguarded, including arrangements for storing private keys or traditional assets.
Offering documentation must clearly disclose how tokenisation is implemented, how wallets are managed, the procedures for AML and KYC compliance, timelines for issuance/redemption and the associated blockchain risks. Governance requirements include ensuring that directors and service providers possess adequate knowledge of tokenisation/DLT and that risk management frameworks are in place. These must address smart contract reliability, key management, data protection, continuity planning and digital access controls. Responsibility must be clearly allocated among stakeholders, and systems must be evaluated for security and regulatory alignment.
The MFSA included two sample use cases to illustrate the application of tokenised fund structures:
- In the first example, a Maltese feeder fund issues digital units through a permissioned DLT, with subscriptions and redemptions automated by smart contracts. A third party ensures that tokens are backed one-to-one by traditional assets and governed by MFSA-approved fund rules.
- The second example involves a PIF targeting Asia-Pacific investors, where tokens are issued to enable continuous trading on a DLT platform. Investors fund subscriptions using fiat currency, while onboarding and compliance checks are conducted via smart contracts. Any migration to a different blockchain must be pre-notified to the MFSA and disclosed to investors.
Why Malta is Attractive for Tokenised Funds
By issuing this position paper, the MFSA reinforces Malta’s role as a progressive jurisdiction for digital financial services. Rather than introducing entirely new frameworks, the authority integrates tokenisation into existing regulatory structures and applies the principle of technology neutrality. This approach allows market participants to leverage blockchain technology within a familiar legal environment while maintaining robust standards of investor protection and operational integrity. The paper encourages the responsible adoption of tokenisation, balancing innovation with regulatory and legal clarity.
For more information on this topic or on financial services in general, feel free to contact the Legal Team of BDO Malta.
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