In October 2017 the Government of Malta published a public consultation paper, proposing a new set of rules to regulate collective investment schemes using virtual currency. Further to industry responses, a feedback statement was issued in January 2018.
The Malta Financial Services Authority (MFSA) has developed and published a ‘rulebook’ to regulate Professional Investor Funds (PIFs) which propose investing in virtual currency as their main investment objective. Rules will apply to PIFs regardless of whether they are investing directly in virtual currency or indirectly through a trading company or special purpose vehicle. The main objectives of implementing such a framework is to ensure investor protection and integrity within the virtual currency market.
Structures Entitled to Invest in a Collective Investment Scheme in Malta
The types of legal structure that will be allowed to invest in a Collective Investment Scheme (CIS) in Malta, which then invests in virtual currency are:
- Investment companies with variable capital (SICAV).
- Investment companies with fixed share capital (INVCO).
- Limited partnerships and unit trusts.
The Malta Financial Services Authority has also confirmed that cellular structures can be established within these vehicles. Professional Investor Funds (PIFs) wishing to invest in virtual currency may therefore also be established as Incorporated Cell Companies (ICCs) or Incorporated Cells (ICs), of either a SICAV or a Recognised Incorporated Cell Company (RICC).
Only ‘Qualifying Investors’ will be allowed to invest in a CIS investing in virtual currency, due to the specific risks associated with virtual currency and the underlying technologies.
Regulations and Future Legislation
A consultation commenced in November 2017 regarding the new regulations. The MFSA has since released a statement, in response to industry feedback, and the Government of Malta will issue slightly revised regulations for PIFs investing in virtual currency. These are the first steps towards a Malta Virtual Currency Act, which may well provide a potential template to be adapted as appropriate by different countries for international use in this sector.
Advantages of the New Rules
Malta will be the first jurisdiction to set up a framework which ensures investor protection and financial security for collective investment schemes investing in virtual currency. Advantages of the new rules include:
- A regulatory framework which ensures that any risks associated with virtual currency are efficiently addressed.
- Safeguards for the interests of investors.
- Additional work is underway for regulating Initial Coin Offerings (ICOs), exchanges and the use of blockchain technology.
For more information on collective investments schemes and virtual currency, or if you are setting up a collective investment scheme investing in virtual currency please contact Maria Muzarowska in the Malta office: firstname.lastname@example.org. Alternatively, please speak to your usual Dixcart contact.