MFSA Announces Consultation on Changes to Chapter 3 of the Virtual Financial Assets Rulebook
The Malta Financial Services Authority (‘MFSA’) has, on the 18 September 2023, issued a draft version of the updated Chapter 3 of the Virtual Financial Assets Rulebook for consultation (the ‘Consultation Document’).
The Consultation Document aims to align the VFA Framework following the entry into force of the Markets in Crypto- Assets Regulation (‘MiCAR’) in order to ensure a seamless and effective transition for Virtual Financial Assets (‘VFA’) Service Providers.
Significant amendments have been introduced in relation to Systems & IT Audit Requirements with the most prominent one being the removal of the need of appointing a Systems Auditor. Moreover, in alignment with the MiCAR, the Initial Capital Requirement for Class 3 and Class 4 VFA License Holders has been notably reduced to €125,000 and €150,000 respectively. As part of these amendments reference to professional indemnity insurance has also been excluded from the Rulebook.
Additionally, the outsourcing requirements have been extensively revised to closely illustrate the requirements set forth in MiCAR. Furthermore, a new requirement to draw up an orderly wind-down plan has been introduced in order to ensure more stability in financial operations.
Other areas which have been reviewed include rules on order execution and client suitability in order to encompass disclosures mandated by MiCAR and to reflect a concerted effort to simplify the regulatory framework with the removal of the Risk Management and the Internal Capital Adequacy Assessment Report.
It is worth noting that a transitionary period of three months will apply to the requirements in the Rulebook, once published, to accommodate the integration of the new provisions and to allow VFA Service Providers to fully comply therewith. These requirements affect three distinct areas which include the orderly wind-down plan, service-specific requirements (supplementary conditions), and white paper disclosure requirements.
All stakeholders are encouraged to review the draft version of the Rulebook issued by MFSA and provide their feedback by no later than Friday 29th September 2023.
For further information on the requirements imposed on VFA Service Providers as a result of the above mentioned amendments, feel free to contact our financial services team on dfcs@dfadvocates.com