The Regulation of ICOs in Malta

Joseph Gauci  -  26/October/2018

Malta has recently taken central stage by becoming the first jurisdiction in the world to create a legal blockchain framework, tailor-made for the effective and consistent regulation of blockchain technology.

ICOs are a revolutionary means of generating funding from investors, intended to fund the ICO creators’ idea or project. The method used within the ICO process bear several similarities to the now-traditional practice of internet crowdfunding, made popular by websites like, but with a clear leap forward in terms of efficiency and functionality. When an ICO is created, interested persons can invest their regular money – referred to as fiat currency in blockchain jargon – in the ICO, and receive crypto tokens or coins in return, which effectively act as digital coupons for future participation in the project or service being crowdfunded by the ICO.

The Maltese blockchain framework will act as a filter process to guarantee that the only ICOs offered to the public are those which have achieved, and are able to maintain, high standards of quality and reliability. This is due to regulation which will verify the ICO’s quality at its inception, and will also provide long-term, continuous supervisory regulation, to make sure that promises made to investors are kept. The Maltese authorities will provide a regulatory stamp of approval, which will guarantee to all interested investors that the ICO in question is legitimate and has surpassed the standards of quality required by the Maltese framework.

Creating an ICO

According to the Virtual Financial Assets Act (the “VFAA”), the Maltese framework will apply to cryptocurrency tokens and coins which are classified as virtual financial assets (“VFAs”).

The principle requirement to create an ICO within the ambit of the Maltese framework is a White Paper which satisfies all the requirements set out by the VFAA. The White Paper is a document which traditionally accompanies the vast majority of ICOs, and in practice can be likened to a marketing brochure or prospectus.

According to the VFAA, the White Paper should include a brief and concise summary of the technical properties of the crypto token or coin being issued by the ICO, as well as details regarding the persons behind the White Paper and the ICO project, details regarding the expenses already undertaken and the future financial prospects of the project, and details regarding protective measures being taken to safeguard against any possibility of money-laundering. The document should then be certified by a VFA Agent, who will confirm that all information being presented by the issuers of the ICO is factual, before presenting the document to the Maltese authorities.

The role of the VFA Agent

The system revolves around the role of the VFA Agent, who acts as a Maltese representative – necessarily resident in Malta – which every ICO must appoint. The VFA Agent is an accredited professional who has been registered as a VFA Agent by the Maltese authorities, after a thorough confirmation of the VFA Agent’s competence in the field. In practice, the VFA Agent acts as a first line of defence to ensure an ICO’s full conformity with the VFAA.

Beyond ICOs, the Maltese blockchain framework is also capable of regulating VFA services, which shall be regulated in conformity with the class of services being provided. These service classes include investment advice in relation to VFAs, the management of portfolios of VFA assets, and even the operation of a cryptocurrency exchange. There has been overwhelming interest in the latter, particularly when news hit that Binancethe world’s leading crypto exchange, would be setting up a base in Malta in order to take advantage of the country’s world-leading blockchain framework.

Opening a Crypto Exchange Bank Account

If you are looking to open a bank account for your crypto exchange, we have the right experts to guide you. We assist crypto exchanges in opening their bank account by guiding them in their KYC process, hence ensuring that banks will be comfortable in accepting their business.

At KSi Malta we also offer the following services related to Blockchain:

  • Advice on the regulatory status of Cryptocurrencies and companies trading in Virtual Coins
  • Act as VFA (Virtual Financial Asset) Agent by advising and guiding issuers in registering an ICO with the MFSA
  • Assistance in obtaining licenses under VFA
  • Tailored audit and accountancy services for Blockchain companies
  • Assistance in the legal aspect of Blockchain backed operations
  • Provision of solutions and advice on KYC related matters
  • Act as a registered system auditor
  • Assistance with smart contracts
  • Assistance in drafting white papers
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