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VIRTUAL CURRENCY FUNDS - MALTA

The MFSA has, on 23rd October 2017, issued a consultation document on the introduction of a proposed new Investment Services Rulebook for Professional Investor Funds (PIFs) investing in virtual currencies.


The rules are proposed to be included in a new and separate Rulebook specifically aimed for funds whose investment objective involves virtual currencies. In its consultation document, the MFSA indicated that the draft rules are specifically aimed to mitigate the potential risks of investing in virtual currencies and safeguard the interests of investors and integrity of the financial markets with respect to such currencies. The new proposed rules are aimed solely for Professional Investor Funds. The MFSA is however currently considering whether to also allow Alternative Investment Funds investing in virtual currencies.


The proposed rules presently limit the legal structures for such type of funds to investment companies, with other legal forms such as unit trusts and limited partnerships being excluded.


The draft rules require the PIF, including its service providers, where applicable, to satisfy the following aspects:


i.          Competence in IT, virtual currencies and underlying technology

ii.         Risk warnings disclosure

iii.        Prior Quality assessmentand research of the virtual currency to be invested into

iv.        Risk management assessment prior to investing

v.         Valuation expertise and adequacy.


In its consultation document, the MFSA indicated various institutions which are being excluded from dealingin virtual currencies for their clients or their own account – with such entities comprising creditinstitutions, financial institutions, [re]insurance companies, includingtheir subsidiaries orassociated companies as well as retirement pension schemes.


The consultation ends on the 10th November 2017.


Notes


The PIF regime is a framework available in Malta which provides for the licensing of collective investment schemes which are open only to Qualifying Investors who are required to invest a minimum of Eur100,000 or currency equivalent and satisfy certain eligibility criteria as specified in the PIF Rules issued by the Malta Financial Services Authority (MFSA), being the single regulator of financial services in Malta.


DF will be actively participating in the consultation exercise on virtual currencies, this being an area closely followed by the firm. For further details on the PIF regime or other financial services related enquiriesincluding on virtual currencies,please contact us on info@dfadvocates.com or telephone +356 21313930/ 21340401.