Is the Virtual Financial Assets Act satisfactory in creating a regulatory framework for initial virtual financial asset offerings and in providing protection for investors?

Abstract

The aim of this Dissertation, is to analyse Initial Virtual Financial Asset Offerings in the context of the recently enacted Virtual Financial Assets Act while also placing particular importance upon the protections granted to investors. In answering whether a balance is achieved between satisfying the innovative needs of issuers while providing the necessary protections for investors, the author will go through the different stages of launching an IVFAO. Preliminarily, it is important to provide a technical description of how IVFAOs come to life as a foundation for the rest of the dissertation. Determining how crypto-assets are classified in Malta is also essential as it provides the basis for determining the applicable law. As will be shown, in order for an entity to launch an IVFAO, its contemplated asset must be classified as a Virtual Financial Asset. The next stage of the IVFAO would require the issuer to appoint a number of functionaries which are crucial in protecting the investor and the financial system as a whole. Of particular importance is the VFA agent which acts as a ‘gatekeeper’ in the VFA market, preventing entry to those who are not fit and proper. Issuers must also prepare a whitepaper if they intend to conduct an IVFAO in Malta. Through the Virtual Financial Assets Act, the whitepaper became a regulated document imposing a number of matters to be disclosed to the market. Protecting the investor should also be a priority after the issuance is complete and thus the author will also examine the safeguards provided post-issuance. Finally, the dissertation will be concluded by providing general observations about the framework established while also suggesting certain improvements.