Cryptocurrency Regulation in Malta Prior to 2024

Prior to 2024, Malta emerged as a leader in the regulation of cryptocurrencies, characterized by a proactive and progressive approach. The Maltese government, recognizing the potential of digital currencies and blockchain technology, actively encouraged their development. While there was no specific legislation for cryptocurrencies initially, Malta rapidly moved towards creating a regulatory framework to foster the growth of the industry and provide legal certainty.

In October 2017, the government issued a consultation document proposing a regulatory framework for collective investment schemes and investments in cryptocurrencies. Subsequently, the Malta Financial Services Authority (MFSA) outlined conditions for professional investor funds investing in cryptocurrencies. In November 2017, the government released a discussion paper on Initial Coin Offerings (ICOs), Virtual Currencies, and Related Service Providers, acknowledging that while some cryptocurrencies might fall under existing financial services legislation, others would remain unregulated. By January 2018, a further discussion paper presented a conceptual framework for the certification of Distributed Ledger Technology (DLT) platforms in Malta​​.

Malta was considering three significant bills to provide a comprehensive regulatory framework for cryptocurrency. These included the Malta Digital Innovation Authority Bill (MDIA Bill) to establish the MDIA with a focus on innovative technology arrangements; the “TAS Bill” for the registration and certification of technology service providers; and the Virtual Currency Bill, establishing a framework for ICOs and regulatory regimes for services related to cryptocurrencies. The latter aimed at regulating ICOs not covered by existing legislation and ensuring transparency and compliance with obligations similar to those for initial public offerings​​.

The MFSA proposed a “financial instrument test” to determine whether an ICO or virtual currency fell within the existing legislative framework or the new regulatory framework being proposed. This two-stage test aimed to clarify the classification of cryptocurrencies within Maltese or EU law. The MFSA was designated as the regulator for the financial services outlined in the Virtual Currency Bill, with extensive regulatory and investigatory powers​​.

Additionally, the Maltese government established a National Blockchain Strategy Taskforce to advise on a framework for DLTs. The government’s non-interference stance with individual banks’ operational policies was evident when the Bank of Valletta blocked cryptocurrency transfers. The Malta Gaming Authority also expressed commitment to allowing the use of cryptocurrencies by its licensees, with a new Gaming Bill considering the inclusion of virtual currencies under the definition of “money and, or money’s worth”​​.

In essence, Malta’s legislative landscape for cryptocurrencies before 2024 reflected a strategic and forward-thinking approach, aiming to position the country as a hub for digital innovation while ensuring consumer protection and adherence to international financial standards.