The Maltese Financial Services Authority has published an analysis of how digital assets that are maintained on distributed ledgers are defined under current financial legislation. A new Financial Instrument Test could help both lawmakers and DLT innovators alike determine how digital assets should be classified.
On April 13, the Maltese government continued to build upon its growing crypto-progressive reputation with the release of the Consultation Paper on the Financial Instrument Test[1], a research report outlining Malta[2]'s vision[3] for classifying digital assets that are tracked via distributed ledger technologies (DLTs).
The 44-page document has three objectives:
- Map how definitions for digital assets on distributed ledgers are generally obscured under current regulatory frameworks;
- Reaffirm how the Financial Instrument Test can clarify regulatory ambiguity via updated classification standards; and
- Prompt "feedback" from the DLT community regarding related ecosystem concerns.
The Old
Building off of its November 2017 Discussion Paper on Initial Coin Offerings, Virtual Currencies and Related Service Providers[4], the MFSA's most recent report analyzes how the European Union's overarching Market's in Financial Instruments Directive[5] (MiFID) defines financial instruments and, more importantly, if those definitions carry implications for DLT assets like virtual currencies.
In addition to evaluating the underlying methodology of the Financial Instrument Test, the MFSA is seeking to discover whether a given DLT asset "is encompassed under (i) the existing EU legislation and corresponding national legislation, (ii) the proposed Virtual Financial Assets Act (VFAA) or (iii) is otherwise exempt."
Industry feedback will be accepted and reviewed on a rolling basis until May 4, 2018, at which point the MSFA will begin establishing a "final version" of the test.
The New
The Financial Instrument Test is likely to be administered in two parts, which will
