MiCA Update: Consultation Process on the Proposed Updates to Chapter 3 of the VFA Rulebook

The new Markets in Crypto-Assets Regulation (MiCA), which will establish the first harmonised regime for crypto-assets across the EU, entered into force in June 2023. The provisions for Crypto-Asset Service Providers, including licence holders in Malta, should apply by the end of December 2024.

The Malta Financial Services Authority (MFSA) has continued its efforts for Malta to be “MiCA ready” as soon as possible by issuing a Consultation Process on the rulebook for Crypto-Asset Services Providers. Malta currently has a defined regulatory regime for Crypto-Asset Service Providers under the Virtual Financial Assets Act (Chapter 590, Law of Malta), but some updates will be necessary for the Maltese framework to be aligned with MiCA.

The notable changes in respect of Chapter 3 of the VFA Rulebook are the following:

  • The systems audit requirement has been removed.
  • The initial capital requirements for Class 3 and 4 licence holders in Malta has been reduced to €125,000 and €150,000 respectively in line with MiCA.
  • The requirement for professional indemnity insurance has been deleted.
  • The outsourcing requirements have been updated in line with MiCA.
  • The service-specific rules in Articles 75 to 81 of the MiCA have been included in the VFA Rulebook. Accordingly, the requirements applicable to VFA Exchanges, order execution and client suitability will be amended.
  • The requirements relating to client categorisation have been removed.
  • The requirement for a Risk Management and the Internal Capital Adequacy Assessment Report will no longer apply.
  • Other prudential/ conduct of business requirements have been added to reflect the obligations for Crypto-Asset Service Providers under MiCA.

The MFSA has asked stakeholders to review the proposed updates and provided feedback by 29th September 2023.