The Malta Financial Services Authority (MFSA)-imposed deadline for Virtual Financial Asset (VFA) Service Providers is just over a week away, after which, applications deemed to be incomplete will be shelved and applicants will be required to cease all VFA operations carried out in or from Malta.

The regulator has set 15th September as the deadline for all outstanding VFA Service Providers, and has even set out deadlines for responses by applicants to its comments to further expedite the process.

Failure to respond within three weeks of receipt will result in the application being shelved.

Applicants who fail to meet all deadlines will be asked to cease VFA operations under the transitory period in terms of Article 62 of the Virtual Financial Assets Act.

The MFSA devised the Virtual Financial Assets Framework to support innovation and new technologies in financial services, particularly in the digital asset space, while at the same time seeking to ensure effective investor protection, financial market integrity and financial stability, the regulator said in its periodic newsletter to inform the public of the state’s efforts to fight financial crime.

The VFA Framework was launched on 1st November 2018 by the Virtual Financial Assets Act which provided for a transitory period of one year for those VFA service providers already operating in or from Malta.

The transitory period came to an end on 31st October 2019, by which time VFA Service Providers intending to apply for a licence notified the MFSA, following which the application process was started.

Back in April, the MFSA had issued a statement to say that 57 companies which, in 2018, launched operations in Malta to enter a transitory period before they could become licensed failed to provide formal notice to start official licensing six months after the deadline expired.

It was noted that only 26 companies, largely made up of cryptocurrency exchanges, proceeded to initiate the application process for a VFA service licence. To date there is no company which has received its VFA Service Provider licence.

The first applications started to be received at the end of December 2019. Applications are currently being reviewed with a view of ensuring that only operators who are ‘fit and proper’ are granted a licence to operate in Malta, the MFSA said in its August newsletter.

“The field of crypto assets is considered as high risk from an anti-money laundering perspective.

“Therefore, the MFSA is applying high standards of due diligence with regard to the review of applications for a VFA licence, including the verification that applicants have the necessary policies, procedures and systems in place to comply with anti-money laundering standards set by the Financial Action Task Force and have the required levels of governance to ensure proper conduct of business.

“MFSA’s strategy with regard to crypto assets is that of contributing towards the establishment of a sector made up of serious operators that are properly regulated and supervised at the highest level. This is important for the integrity of Malta’s financial system and in line with the expectations of international institutions such as the International Monetary Fund and MoneyVal.”