Crypto assets regulation in Malta : a regulatory study

Abstract

Regulatory development is a very important and ongoing process in today’s financial services industry. The introduction and growing popularity of crypto assets led most regulators around the globe to start looking at ways on how to regulate them. The ‘Virtual Financial Assets Act’ is a tangible prove of Malta’s success at coming up with a holistic regulatory framework. The main research question in this study is: Why should crypto assets be regulated? In affirmative the next immediate question would be: How should they be regulated? The data to answer these questions has been collected through a semi-structured face-to-face interview with Malta Financial Services Authority representatives and five local industry players. Primarily, this study gives an overview of the way Malta regulated this new sector in comparison to other regulations adopted in different countries. By adopting a qualitative approach, the research was able to identify the main risks and benefits associated with crypto assets and have a clearer idea on how the Maltese framework mitigated such risks without stifling innovation. The general public’s education and attitude regarding this matter was also taken into consideration. The research clearly established the need for crypto assets regulation to be set out at an international level. Such a regulation would not only lead to a harmonisation between all jurisdictions but will also develop crypto assets to be used at their maximum potential. The Maltese regulation already follows the recommendations set out by the European Union. Once a harmonised EU regulation is to be set, the Maltese industry would be in a very beneficial position as only small changes and differences will need to be adapted to our current regulation. Now that the Maltese regulation is in place, market supervision and enforcement must be done correctly especially at initial stages. This study offers suggestions on how this can be done. At this point in time having such processes is very important not to jeopardise Malta’s reputation. Given the dynamic concept of crypto assets and the fast pace they are developing at, it is of utmost importance that the regulation is updated constantly and developed accordingly. Not doing so would put the regulation at risk of becoming outdated, while also creating a barrier in the development of crypto assets and the blockchain technology. Now that the Maltese regulation is in place, market supervision and enforcement must be done correctly especially at initial stages. This study offers suggestions on how this can be done. At this point in time having such processes is very important not to jeopardise Malta’s reputation. Given the dynamic concept of crypto assets and the fast pace they are developing at, it is of utmost importance that the regulation is updated constantly and developed accordingly. Not doing so would put the regulation at risk of becoming outdated, while also creating a barrier in the development of crypto assets and the blockchain technology.