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The Markets in Crypto-Assets (“MiCA”) regulation
has finally become a reality following its approval by the European
Council. Here are the answers to the most frequently asked
questions about MiCA and the Virtual Financial Assets
(“VFA”) framework, the current crypto-assets regulatory
framework in Malta.
What is MiCA?
MiCA stands for Markets in Crypto Assets regulation, which was
introduced in 2020 by the European Commission as part of the
digital finance package. Since then, everyone who is working or in
some way or another related or merely interested in crypto-assets
as well as related to them services have been looking forward to
seeing the final result of the regulation. Two years down the line,
following discussions, doubts and disagreements, MiCA’s text
was approved by the European Council. And it comes at a very
important time. With the recent FTX drama, we are now appreciating
even further the importance and need of regulation in this
Why is MiCA important?
Once MiCA enters into force it will establish a harmonized
crypto regulatory framework at the European Union (the
“EU“) level and will become the first
pan-national instrument worldwide that will lay down a regulatory
framework for crypto assets issuers and crypto assets service
providers as well as certain types of crypto assets in general.
Furthermore, MiCA will apply directly across the EU replacing
the existing domestic laws and harmonizing all national
legislations in the area of crypto assets and related to them
What does MiCA mean for crypto-assets industry?
Most EU Member States will need to perform a significant work by
(1) either replacing their current frameworks that somewhat
regulate crypto-assets as well as related to them activities or (2)
to start from scratch their journey in regulating
What is the current crypto-assets regulatory framework in
Malta, on the other hand, was one of the first countries to
establish a crypto regulatory framework back in 2018, namely,
Virtual Financial Assets (“VFA“)
framework, which is based on the EU Markets in Financial
Instruments Directive (“MiFID“) and
regulates initial VFA offerings as well as outlines licence
requirement for VFA service providers. MiCA, in its turn, has also
been based on the latter Directive meaning that Maltese VFA
framework and EU MiCA framework are considerably similar.
What does VFA stand for?
VFA or a virtual financial asset is defined as any form of
digital medium recordation that is used as a digital medium of
exchange, unit of account, or store of value and that is not
electronic money, a financial instrument or a virtual token.
What type of crypto related services are under the scope?
Being based on MiFID, crypto-asset service providers framework
under MiCA and VFA service providers framework under Maltese VFA
Act are almost identical. Indeed, both frameworks outline similar
crypto related services which trigger a licensing requirement, as
Furthermore, in the same way as MiCA, the VFA Act encompasses
similar general rules and obligations required to be satisfied by
the service providers.
What will happen to crypto-assets service providers already
compliant with the VFA Maltese framework?
When an EU Member State has already established a bespoke
licensing regime for crypto-assets service providers
(“CASP“s), MiCA mentions that regulators
will apply a simplified authorization process. It will help
entities transition from a national licence to a MiCA CASP licence
that is valid across the entire EU.
In Malta, the MFSA already announced that they have started
identifying and analysing the differences between MiCA and the VFA
framework to align the latter as much as possible to the new
EU-wide framework transforming Malta into the first MiCA compliant
EU Member State. Therefore, the existing Malta licenced VFA service
providers would be able to transition seamlessly under the MiCA
framework as soon as it comes into force, giving the operators a
competitive advantage over other entities established in other EEA
When is MiCA expected to come into force?
The new regulation has been expected to be ratified and
published in the Official Journal in Q1 2023 (entry into force 20
days later) with most regulations due to apply 12-18 months from
its entry into force. However, due to the technical issue in
translating the text into 24 official languages of the EU, the
final vote on MiCA regulation has been postponed and is currently
scheduled to take place in April 2023.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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