ACT No. XXX of 2018 AN ACT to regulate the field of Initial Virtual Financial Asset Offerings and Virtual Financial Assets and to make provision for matters ancillary or incidental thereto or connected therewith.

I assent.

(L.S.)

MARIE-LOUISE

COLEIRO PRECA

President

20th July, 2018

ACT No. XXX of 2018

AN ACT to regulate the field of Initial Virtual Financial Asset

Offerings and Virtual Financial Assets and to make provision for

matters ancillary or incidental thereto or connected therewith.

BE IT ENACTED by the President, by and with the advice and

consent of the House of Representatives, in this present Parliament

assembled, and by the authority of the same, as follows:-

(1) The short title of this Act is the Virtual Financial

Assets Act, 2018.

(2) This Act shall come into force on such date as the Minister

for digital economy may by notice in the Gazette establish, and

different dates may be so established for different provisions and

different purposes of this Act.

(Article 2)

Matters to be specified in a whitepaper of an issuer and requirements

for its approval and publication

General principles

1. The whitepaper shall contain the information which,

according to the particular nature of the issuer and of the virtual

financial assets offered to the public, is necessary to enable investors

to make an informed assessment of the prospects of the issuer, the

proposed project and of the features of the virtual financial asset. This

information shall be presented in an easily analysable and

comprehensible form.

2. Certain information specified in this Schedule may be

omitted from the whitepaper if

(a) disclosure of such information would be contrary to

the public interest;

(b) disclosure of such information would be seriously

detrimental to the issuer, provided that the omission would not

be likely to mislead the public with regard to facts and

circumstances essential for an informed assessment of the

prospects of the issuer, the proposed project and of the features

of the virtual financial assets to which the whitepaper relates;

(c)

such information is of minor importance only for a

specific offer and is not information that will influence an

informed assessment of the prospects of the issuer, the proposed

project and of the features of the virtual financial assets to

which the whitepaper relates; or

(d) disclosure of such information is found to be

inappropriate to the issuer’s sphere of activity or proposed

activity, as the case may be, or its legal form or to the virtual

financial assets being offered, in which case the whitepaper

shall contain equivalent information when available.

3. The whitepaper shall be drafted in the English language

and any or no additional languages, at the issuer’s discretion.

Summary

4. (1)

The whitepaper shall include a summary. The

summary shall, in brief and non-technical language, provide key

information in relation to the offering. The format and content of the

summary of the whitepaper shall provide, in conjunction with the

whitepaper, appropriate information about essential elements of the

virtual financial assets concerned in order to aid investors when

considering whether to invest in such virtual financial assets. The

summary shall be drawn up in a common format in order to facilitate

comparability of the summaries of similar virtual financial assets and

its content should convey the key information of the virtual financial

assets concerned in order to aid investors when considering whether

to invest in such virtual financial assets. The summary shall also

include a warning that

(a)

it should be read as an introduction to the

whitepaper;

(b) any decision to invest in the virtual financial assets

should be based on consideration of the whitepaper as a whole

by the investor;

(c)

the offering of virtual financial assets does not

constitute an offer or solicitation to sell financial instruments

and that any such offer or solicitation of financial instruments

will be made only by means of a prospectus or other offering

documentation in terms of any applicable Maltese law;

(d) without prejudice to article 10 of this Act, civil

liability attaches to those persons who have tabled the summary

including any translation thereof, and applied for its

notification.

(2) For the purposes of this paragraph "key information"

means essential and appropriately structured information which is to

be provided to investors with a view to enabling them to understand

the nature and the risks of the proposed project, the issuer and the

virtual financial assets that are being offered to them.

Specific matters to be included

5. Paragraphs 6 to 13 of this Schedule contain the specific

matters to be included in a whitepaper.

The persons responsible for the whitepaper

6. Names, functions and declarations by the persons

responsible for the whitepaper that to the best of their knowledge the

information contained in the whitepaper is in accordance with the

facts and that the whitepaper makes no omission likely to affect its

The offer to the public

7. At least, and to the extent it is applicable, the following

information on the offer shall be provided in the whitepaper

(a)

description of the reason behind the initial virtual

financial asset offering;

(b) detailed technical description of the protocol,

platform and, or application, as the case may be, and the

associated benefits;

(c)

detailed description of the sustainability and

scalability of the proposed project;

(d) associated challenges and risks as well as mitigating

measures thereof;

(e)

detailed description of the characteristics and

functionality of the virtual financial assets being offered;

(f)

detailed description of the issuer, VFA agent,

development team, advisors and any other service providers that

may be deployed for the realisation of the project;

(g)

detailed description of the issuer’s wallet/s used;

(h) description of the security safeguards against cyber

threats to the underlying protocol, to any off-chain activities and

to any wallets used by the issuer;

(i)

detailed description of the life cycle of the initial

virtual financial asset offering and the proposed project;

(j)

detailed description of the past and future milestones

and project financing;

(k)

detailed description of the targeted investor base;

(l)

exchange rate of the virtual financial assets;

(m) description

of

the

underlying

protocol’s

interoperability with other protocols;

(n)

description of the manner funds raised through the

initial virtual financial asset offering will be allocated;

(o)

the amount and purpose of the issue;

(p) the total number of virtual financial assets to be

issued and their features;

(q)

the distribution of virtual financial assets;

(r)

the consensus algorithm, where applicable;

(s)

incentive mechanism to secure any transactions,

transaction and/or any other applicable fees;

(t)

in the case of a new protocol, the estimated speed of

transactions;

(u)

any applicable taxes;

(v)

any set soft cap and hard cap for the offering;

(w)

the period during which the offer is open;

(x)

any person underwriting or guaranteeing the offer;

(y) any restrictions on the free transferability of the

virtual financial assets being offered and the DLT exchange/s on

which they may be traded, to the extent known by the issuer;

(z)

methods of payment;

(aa) specific notice that investors participating in the

initial virtual financial asset offering will be able to get their

contribution back if the soft cap is not reached at the end of the

offering and detailed description of the refund mechanism,

including the expected time-line of when such refund will be

completed;

(ab) detailed description of the risks associated with the

virtual financial assets and the investment therein;

(ac)

the procedure for the exercise of any right of pre-

emption;

(ad) detailed description of the smart contract/s, if any,

deployed including inter alia the adopted standards, its/their

underlying protocol/s, functionality/-ies and associated

operational costs;

(ae) if any smart contract/s is/are deployed by the issuer,

details of the auditor who performed an audit on it/them;

(af) description of any restrictions embedded in the

smart contract/s deployed, if any, including inter alia any

investment and/or geographical restrictions;

(ag) the programme agents used to obtain data and verify

occurrences from smart contracts (also known as ‘oracles’) used

and detailed description of their characteristics and functionality

thereof;

(ah) bonuses applicable to early investors including inter

alia discounted purchase price for virtual financial assets;

(ai) the period during which voluntary withdrawals are

permitted by the smart contract, if any;

(aj) description of the issuer’s adopted white-listing and

anti-money laundering and counter financing of terrorism

procedures in terms of the Prevention of Money Laundering Act

and any regulations made and rules issued thereunder;

(ak) intellectual property rights associated with the

offering and protection thereof; and

(al) the methods of and time-limits for delivery of the

virtual financial assets

Provided that the competent authority shall have the power

to waive or modify any of the above requirements within the context

of a particular initial VFA offering or a particular application for

admission to trading on a DLT exchange, as the case may be.

Details of the issuer

8. The following details of the issuer

-

Name;

-

Registered address and registration number;

-

Date of registration;

-

The issuer’s object(s);

-

Where applicable, the group of undertakings to

which the issuer belongs;

-

In so far as they are known, indication of the

members who directly or indirectly exercise or could exercise a

determining role in the issuer’s administration.

The issuer’s principal activities

9. Description of the issuer’s principal activities including the

disclosure of any legal proceedings having an important effect on the

issuer’s financial position.

The issuer’s board of administration

10. Names, addresses and functions of administrators.

Benefits for third parties and other expenditure

11. The amount or estimated amount of preliminary expenses

and the persons by whom any of those expenses have been paid or are

payable, and the amount or estimated amount of the expenses of the

issue and the persons by whom any of those expenses have been paid

or are payable, in whatever form.

Issuer’s financial track record

12. Where the issuer has been established for a period

exceeding three years, details of its financial track record.

Validity of a whitepaper, arrangements for approval and

publication of a whitepaper.

13. A whitepaper shall be valid for 6 months after its approval

by the competent authority for offers to the public.

14. (1) The competent authority shall not register a

whitepaper unless it is satisfied that the whitepaper has been drawn

up in accordance with the provisions of this Act, this Schedule and

any regulations, rules or guidance made or issued thereunder.

(2) The competent authority shall notify the issuer or the VFA

agent, as the case may be, of its decision regarding the approval or

otherwise of the whitepaper.

Significant new factors, material mistakes or inaccuracies

15. (1) Every significant new factor, material mistake or

inaccuracy relating to the information included in the whitepaper

which is capable of affecting the assessment of the virtual financial

assets and which arises or is noted between the time when the

whitepaper is approved and the final closing of the offer to the public,

whichever occurs later, shall be mentioned in a supplement appended

to the whitepaper. Such a supplement shall be approved in the same

way and published in accordance with at least the same arrangements

as were applied when the original whitepaper was published. The

summary, and any translations thereof, shall also be supplemented, if

necessary, to take into account the new information included in the

supplement.

(2) Investors who have already agreed to purchase or

subscribe for the virtual financial assets before the supplement is

published shall have the right to withdraw their acceptance within

two working days after the publication of the supplement, provided

that the new factor, mistake or inaccuracy referred to in paragraph (1)

arose before the final closing of the offer to the public and the

delivery of the virtual financial assets. That period may be extended

by the issuer in which case the smart contract, if any, shall be updated

accordingly. The final date of the right of withdrawal shall be stated

in the supplement.

(1) Unless the context otherwise requires, terms and

phrases not defined in this Act shall have the same meaning as the

said terms and phrases are given in the Malta Digital Innovation

Authority Act, 2018.

(2) In this Act and in the Schedules thereto, unless the context

otherwise requires -

"administrator" means an officer or any person who is appointed

to carry out representative and fiduciary functions in the control and

administration of a legal person, and any person who carries out such

functions even if under another name, but shall not include a technical

administrator or a resident agent under the Innovative Technology

Arrangements and Services Act, 2018 or a VFA agent, and the term

"board of administration" shall be construed accordingly;

"advertisement" means any form or medium of marketing

activity disseminated to the public by means of any type of media,

which promotes the purchase of a virtual financial asset or the

procurement of a VFA service

Provided that an advertisement shall not include the

provision of a personal recommendation;

"assets" means movable and immovable property of any kind;

"benchmark" means any rate, index or figure, made available to

the public or published that is periodically or regularly determined by

the application of a formula to, or on the basis of, the value of one or

more underlying assets or prices, including estimated prices, actual or

estimated interest rates or other values, or surveys, and by reference

to which the amount payable under a virtual financial asset or the

value of a virtual financial asset is determined;

"beneficial owner" shall have the same meaning assigned to it

under regulation 2 of the Prevention of Money Laundering and

Funding of Terrorism Regulations, and "beneficial ownership" shall

be construed accordingly;

"Central Bank" means the Central Bank of Malta as defined by

the Central Bank of Malta Act;

"company" means a limited liability company constituted in

Malta in accordance with the Companies Act or any law which may Cap. 386.

from time to time be in force, or a company incorporated outside

Malta, provided that such company if not incorporated in Malta

would qualify to be so incorporated under the laws of Malta;

"competent authority" means the Malta Financial Services

Authority established by the Malta Financial Services Authority Act; Cap. 330.

"court" means the Civil Court, First Hall;

"decision" includes any directive, determination, direction,

condition, measure, requirement or specification, howsoever

described, made by the competent authority;

"Directive 2015/849/EU" means Directive 2015/849/EU of the

European Parliament and of the Council of 20 May 2015 on the

prevention of the use of the financial system for the purposes of

money laundering or terrorist financing, amending Regulation (EU)

No 648/2012 of the European Parliament and of the Council, and

repealing Directive 2005/60/EC of the European Parliament and of

the Council and Commission Directive 2006/70/EC, as may be

amended from time to time;

"Distributed Ledger Technology" or "DLT" means a database

system in which information is recorded, consensually shared, and

synchronised across a network of multiple nodes as further described

in the First Schedule of the Innovative Technology Arrangements and

Services Act, 2018, whether the same is certified under that Act or Act

of 2018.

otherwise;

"DLT asset" means -

(a)

a virtual token;

(b)

a virtual financial asset;

(c)

electronic money; or

(d)

a financial instrument,

that is intrinsically dependent on, or utilises, Distributed Ledger

Technology;

"DLT exchange" means any trading and, or exchange platform

or facility, whether in Malta or in another jurisdiction, on which any

form of DLT asset may be transacted in accordance with the rules of

the platform or facility;

"document" or "documentation" includes information recorded

in any form and, in relation to information recorded otherwise than in

humanly intelligible form, references to its production include

references to producing a copy of the information in legible form;

"EBA" means the European Banking Authority established by

Regulation (EU) No 1093/2010;

"EEA State" means a State which is a contracting party to the

agreement on the European Economic Area signed in Porto on 2 May

1992 as amended by the Protocol signed at Brussels on 17 March

1993, and as amended by any subsequent acts;

"EIOPA" means the European Insurance and Occupational

Pensions Authority established in terms of Article 1 of Regulation

(EU) No 1094/2010;

"electronic money" shall have the same meaning assigned to it

under the Third Schedule to the Financial Institutions Act;

"ESMA" means the European Securities and Markets Authority

established by Regulation (EU) No 1095/2010 of the European

Parliament and of the Council of 24 November 2010;

"ESRB" means the European Systemic Risk Board established

by Regulation (EU) No 1092/2010 of the European Parliament and of

the Council of 24 November 2010, on European Union macro-

prudential oversight of the financial system and establishing a

European Systemic Risk Board;

"European regulatory authority" means an authority in a

Member State or EEA State, other than Malta, which exercises any

regulatory or supervisory function in relation to financial services

corresponding to a function of the competent authority as defined in

the Malta Financial Services Authority Act;

"European right" means the entitlement of a licence holder to

establish a branch or provide services in a Member State or an EEA

State, other than Malta -

(a)

in accordance with the Treaty on the Functioning of

the European Union as applied in that Member State or EEA

State; and

(b) subject to any regulations made under this Act, or

rules issued by the competent authority pursuant to this Act;

"European Supervisory Authorities" or "ESAs" means EBA,

ESMA and EIOPA;

"financial instrument" shall have the same meaning assigned to

it under the Second Schedule to the Investment Services Act, whether Cap. 370.

or not issued in Malta;

"funds" means banknotes and coins, scriptural money,

electronic money and virtual financial assets;

"initial virtual financial asset offering" or "initial VFA offering"

means a method of raising funds whereby an issuer is issuing virtual

financial assets and is offering them in exchange for funds;

"inspector" means an inspector appointed under article 40;

"issuer" means a legal person duly formed under any law for the

time being in force in Malta which issues or proposes to issue virtual

financial assets in or from within Malta;

"licence" means a licence to provide a VFA service or services

granted by the competent authority in terms of article 15;

"licence holder" means a person who holds a licence under this

Act;

"Malta’s international

commitments" means Malta’s

commitments, responsibilities and obligations arising out of

membership of, or affiliation to, or relationship with, any

international, global or regional organisations or grouping of

countries or out of any treaty, convention or other international

agreement, however called, whether bilateral or multilateral, to which

Malta is a party;

"market abuse" means insider dealing, the unlawful disclosure

of inside information and market manipulation in relation to any

transaction, order or behaviour concerning any virtual financial asset;

"Member State" means a Member State of the European Union;

"MiFID" means Directive 2014/65/EU of the European

Parliament and of the Council of 15 May 2014, on markets in

financial instruments and amending Directive 2002/92/EC and

Directive 2011/61/EU, as amended from time to time, and includes

any implementing measures that have been or may be issued

thereunder;

"Minister" means the Minister responsible for the regulation of

financial services;

"overseas regulatory authority" means an authority in a country

or territory outside Malta that is not a Member State or EEA State

which exercises any regulatory or supervisory function in relation to

financial services corresponding to a function of the competent

authority as defined in the Malta Financial Services Authority Act;

"person" means a natural or legal person in terms of law;

"prescribed" means prescribed by regulations made under this

Act;

"qualifying holding" means a direct or indirect holding in a legal

person which represents ten per cent (10%) or more of the capital or

of the voting rights in such person which makes it possible to exercise

a significant influence on the administration of the person in which

that holding subsists and includes the holding of DLT assets with

voting, control or ownership rights, and "qualifying holder" shall be

construed accordingly;

"recognised jurisdiction" means a member of the European

Union or the EEA or the Organisation for Economic Co-operation

and Development as well as any other jurisdiction approved by notice

of the Minister from time to time for the purpose of this definition;

"resident in Malta" means an individual whose habitual

residence is in Malta;

"rules" refers to rules issued by the competent authority in terms

of this Act;

"smart contract" means a form of technology arrangement

consisting of -

(a)

a computer protocol; or

(b) an agreement concluded wholly or partly in an

electronic form, which is automatable and enforceable by

computer code, although some parts may require human input

and control and which may be also enforceable by ordinary

legal methods or by a mixture of both;

"subject person" shall have the same meaning assigned to it

under regulation 2 of the Prevention of Money Laundering and

Funding of Terrorism Regulations;

"subsidiary" has the same meaning assigned to it under article 2

of the Companies Act;

"Tribunal" means the Financial Services Tribunal established

under article 21 of the Malta Financial Services Authority Act;

"unit" means any representation of the rights and interests in a

legal person and "unit holder" shall be construed accordingly;

"VFA agent" means a person registered with the competent

authority under this Act and authorised to carry on the profession of

(a)

advocate, accountant or auditor; or

(b) a firm of advocates, accountants or auditors, or

corporate services providers; or

(c)

a legal organisation which is wholly owned and

controlled by persons referred to in paragraphs (a) or (b),

whether in Malta or in another recognised jurisdiction, or any other

class of persons holding authorisations, qualifications and, or

experience deemed by the competent authority as possessing suitable

expertise to exercise the functions listed under articles 7 and, or 14;

"VFA agreement" means any agreement the making or

performance of which, by either party, constitutes a service or activity

licensable under this Act;

"VFA exchange" means a DLT exchange operating in or from

within Malta, on which only virtual financial assets may be transacted

in accordance with the rules of the platform or facility, which is

licensed by the competent authority under this Act to provide such

services;

"VFA exchange operator" means a person or persons who

manages and, or operates the business of a VFA exchange and may be

the VFA exchange itself;

"VFA service" means any service falling within the Second

Schedule when provided in relation to a DLT asset which has been

determined to be a virtual financial asset;

"virtual financial asset" or "VFA" means 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 -

(a)

electronic money;

(b)

a financial instrument; or

(c)

a virtual token;

"virtual token" means a form of digital medium recordation

whose utility, value or application is restricted solely to the

acquisition of goods or services, either solely within the DLT

platform on or in relation to which it was issued or within a limited

network of DLT platforms

Provided that the term ''DLT platform'' referred to in this

definition shall exclude DLT exchanges

Provided further that a virtual token which is or may be

converted into another DLT asset type shall be treated as the DLT asset

type into which it is or may be converted;

"whitepaper" means a document in such form and containing

such information as specified in article 4 and the First Schedule.

(3) Any reference in this Act to any law, or provision thereof,

shall be construed as a reference to that law or provision as from time

to time in force, and shall include a reference to any enactment

replacing such law or provision, and to any subsidiary legislation

made thereunder.

(4) In this Act and in any regulations made thereunder, if there

is any conflict between the English and Maltese text, the English text

shall prevail.

PART II

Initial VFA Offerings

(Article 2)

VFA services

1. Reception and Transmission of Orders

The reception from a person of an order to buy, sell or subscribe

for virtual financial assets and the transmission of that order to a third

party for execution.

2. Execution of orders on behalf of other persons

Acting to conclude agreements to buy, sell or subscribe for one

or more virtual financial assets on behalf of other persons.

3. Dealing on own account

Trading against proprietary capital resulting in conclusion of

transactions in one or more virtual financial assets.

4. Portfolio Management

Managing or agreeing to manage assets belonging to another

person if those assets consist of or include one or more virtual

financial assets or the arrangements for their management are such

that the person managing or agreeing to manage those assets has a

discretion to invest any of those assets in one or more virtual financial

assets

Provided that for the purposes of this paragraph, the term

"assets" shall exclude any financial instrument, and whether or not

issued in Malta.

5. Custodian or Nominee Services

(a)

Acting as custodian or nominee holder of a virtual

financial asset and, or private cryptographic key; or

(b) holding a virtual financial asset and, or private

cryptographic key as nominee, where the person acting as

nominee is so doing on behalf of another person who is

providing any VFA service under this Schedule or on behalf of a

client of such person, and such nominee holding is carried out in

relation to such service.

6. Investment Advice

Giving, offering or agreeing to give, to persons in their capacity

as investors or potential investors or as agent for an investor or

potential investor, a personal recommendation in respect of one or

more transactions relating to one or more virtual financial assets.

For the purposes of this paragraph, a "personal

recommendation" shall mean a recommendation presented as suitable

for the person to whom it is addressed, or which is based on a

consideration of the circumstances of that person, and must constitute

a recommendation to take one of the following steps

(a)

to buy, sell, subscribe for, exchange, redeem or hold

a particular virtual financial asset;

(b) to exercise or not to exercise any right conferred by

a particular virtual financial asset to buy, sell, subscribe for,

exchange, or redeem it.

A recommendation is not a personal recommendation if it is

issued exclusively through distribution channels or to the public.

7. Placing of virtual financial assets

The marketing of newly-issued virtual financial assets or of

virtual financial assets which are already in issue but not admitted to

trading on a DLT exchange, to specified persons and which does not

involve an offer to the public or to existing holders of the issuer’s

virtual financial assets.

8. The operation of a VFA exchange.

Passed by the House of Representatives at Sitting No. 137 of the

4th July, 2018.

ANĠLU FARRUGIA

Speaker

JOSANNE PARIS

Acting Clerk of the

House of Representatives

€6.12

(1) No issuer shall offer a virtual financial asset to the

public in or from within Malta or shall apply for a virtual financial

asset’s admission to trading on a DLT exchange unless such issuer

draws up a whitepaper which -

(a)

complies with the requirements of article 4; and

(b)

is registered in accordance with sub-article (2)

Provided that where a DLT asset is determined by both the

issuer and its VFA agent, as appointed by the issuer in terms of article

7(1)(b) to be a financial instrument or electronic money, the issuer

shall be required to comply with the respective applicable laws in lieu

of the provisions of this Act.

(2) No whitepaper shall be issued or published in terms of

article 9(2) unless, ten working days before the date of its circulation in

any way whatsoever, a copy thereof, signed by every person named

therein as a member of the issuer’s board of administration or their

agent authorised in writing has been delivered to the competent

authority.

(3) The VFA agent appointed in terms of article 7 shall confirm

to the competent authority that the whitepaper complies with this article

and article 4 and shall state any assumptions it has made and any

reservations it may have on any matter relating to the whitepaper for

the consideration of the competent authority.

(4) Upon being satisfied that the requirements of article 4(1)

have been complied with, the competent authority shall register the

whitepaper.

(1)

Every whitepaper shall -

Dating of

whitepaper and

matters to be

(a)

be dated;

stated therein.

(b)

state the matters specified in the First Schedule; and

(c)

include a statement by the board of administration

confirming that the whitepaper complies with the requirements

of article 3 and of this article.

(2) A condition requiring or binding an investor in an initial

VFA offering to waive compliance with any requirement of this

article or purporting to affect the investor with notice of any contract,

document or matter not specifically referred to in the whitepaper shall

be void.

Where the issuer maintains a website, its homepage shall at Website.

least contain such information and in such format as may be required

by the competent authority by means of rules issued under this Act.

(1) Any type of advertisements relating to either an Advertisements.

initial VFA offering or the admission of a virtual financial asset to

trading on a VFA exchange shall satisfy the following requirements

(a) advertisements shall be clearly identifiable as such.

The information contained in the advertisement shall not be

inaccurate or misleading. This information shall also be

consistent with the information contained in the whitepaper, if

already published in terms of article 9(2), or with the

information required to be in the whitepaper, if the whitepaper

is to be published afterwards;

(b) an advertisement shall contain a statement that a

whitepaper has been or will be published in terms of article 9(2)

and the addresses and times at which copies of the whitepaper

are or will be available to the public; and

(c)

all information concerning the initial VFA offering

or the admission to trading on a VFA exchange disclosed in an

oral or written form, even if not for advertising purposes, shall

be consistent with that contained in the whitepaper

Provided that the term "information" shall be deemed for

the purposes of this article to include the name of any person

endorsing the issuer’s whitepaper

Provided further that where a person under this sub-article is

an issuer within the meaning of this Act, the reference to "VFA

exchange" shall be read as a reference to "DLT exchange".

(2) Such information shall be included in the whitepaper or in

a supplement thereto in accordance with the First Schedule.

(1) An issuer is required to appoint, and have at all

times in place, a VFA agent who shall be registered with the

competent authority under this Act and shall

(a)

advise and guide the issuer as to its responsibilities

and obligations to ensure compliance with the provisions of this

Act and of any rules or regulations issued thereunder;

(b) receive and retain all documentation and information

to demonstrate how, and to what extent, the issuer has, in the VFA

agent’s opinion, satisfied the requirements as prescribed in the

provisions of this Act and of any rules or regulations issued

thereunder, in so far as they apply to any offer or admission to

trading referred to in article 3, including inter alia how the issuer

is considered to be a fit and proper person to carry out the activity

or activities referred to in article 3, and to demonstrate how the

issuer has complied and, as far as it can determine, will comply

with its continuing obligations under this Act;

(c)

advise and guide the issuer as to its responsibilities

and obligations to ensure compliance with the provisions of this

Act and of any rules or regulations issued thereunder;

(d) advise and guide the issuer on all matters relating to

the admission of the issuer’s virtual financial assets to trading

on a DLT exchange in terms of article 8, and their ongoing

trading thereon, and submit all documentation and information

in relation thereto;

(e)

submit to the competent authority all required

information and documentation in terms of this Act and of any

regulations made or rules issued thereunder, including the

confirmations in terms of article 4(1), in a timely manner;

(f)

disclose to the competent authority without delay

any information or explanations that the competent authority

may reasonably require for the purpose of verifying any

information which should be taken into account in considering

an application for registration of a whitepaper;

(g) not be an employee or otherwise engaged with the

issuer in a manner which prohibits him from exercising

independent professional judgement and for the avoidance of

doubt, persons connected to the VFA agent shall not be

considered as prohibited from exercising independent

professional judgement only because other persons in the same

organization or activity, including their partners or employees,

have been simultaneously engaged to provide legal advice or

financial or consultancy or accounting or administrative support

services to an issuer;

(h) act as liaison between the issuer and the competent

authority on all matters arising in connection with the

registration of the whitepaper or the trading of the issuer’s

virtual financial assets on a DLT exchange;

(i)

advise the competent authority in writing without

delay of its resignation, its intention to surrender its registration

or if its appointment is terminated giving details of any relevant

facts or circumstances thereto. A copy of such notification shall

also be sent to the issuer;

(j)

review and submit to the competent authority on

behalf of the administrators of an issuer on an annual basis a

certificate of compliance within the meaning of article 32;

(k)

be considered as a subject person; and

(l)

comply with any other conditions as the competent

authority may require or as may be prescribed.

(2) In discharging its obligations under sub-article (1), a VFA

agent shall

(a) deal with the competent authority in an open and co-

operative manner;

(b) deal promptly with all enquiries raised by the

competent authority; and

(c)

disclose to the competent authority in a timely

manner any material information relating to itself or the issuer

of which it has knowledge which addresses non-compliance

with any of the provisions of this Act or of any regulations made

or rules issued thereunder.

(3) The competent authority shall establish a public register of

all registered VFA agents, which shall be publicly available for

consultation, shall be accessible online and shall be updated on a

regular basis.

(4) Articles 13, 14(1) and (2), 15(1), (2)(a), (3) and (5) to (8),

17 to 28 and 31 shall apply to VFA agents mutatis mutandis and to

such extent as may be specified in the regulations made or rules

issued under this Act

Provided that article 53 shall be applicable only in relation

to articles 13, 25(1), 26 and 28 mentioned in this sub-article.

(5) Where the applicant is constituted in a recognised

jurisdiction, he shall abide with any local presence requirements as may

be specified in the regulations made or rules issued under this Act.

(1) A person may apply for admission of its virtual

financial assets to trading on a VFA exchange in accordance with the

provisions of any regulations made or rules issued under this Act

Provided that an application in terms of this sub-article

shall be made only through a VFA agent

Provided further that where a person under this sub-article

is an issuer within the meaning found under this Act, the reference to

"VFA exchange" shall be read as a reference to "DLT exchange".

(2) Where, further to an application made under sub-article

(1), an issuer’s virtual financial assets are admitted to trading, the

issuer shall comply with all the applicable requirements as prescribed

in this Act and any regulations made and rules issued thereunder for

as long as such virtual financial assets remain admitted to trading

Provided that the provisions of article 3(1) and of this sub-

article shall not apply in so far as the said virtual financial assets have

been admitted to trading irrespective of the issuer’s will.

(1)

An issuer shall

Applicable

principles.

(a)

conduct its business with honesty and integrity;

(b) communicate with his investors in a fair, clear and

not misleading manner;

(c)

conduct its business with due skill, care and

diligence;

(d)

identify and manage any conflict of interest that may

arise;

(e)

have effective arrangements in place for the

protection of investors’ funds;

(f)

have effective administration arrangements;

(g) maintain all of its systems and security access

protocols to appropriate international standards; and

(h)

be considered as a subject person.

(2) Where an issuer maintains a website in terms of article 5

and is required to make public any information or provide notice to

the public, the issuer shall be considered to have complied with this

obligation if it publishes such information or notice on his website.

(1) The issuer shall be liable for damages sustained by a Civil liability

person as a direct consequence of such person having bought virtual for

misstatements in

financial assets, either as part of an initial VFA offering by such whitepaper,

advertisements

issuer or on a DLT exchange, on the basis of information contained in and website.

the whitepaper, website or advertisement by reason of any untrue

statement included therein

Provided that a statement included in a whitepaper, website

or advertisement shall be deemed to be untrue if it is misleading or

otherwise inaccurate or inconsistent, either wilfully or in consequence

of gross negligence, in the form and context in which it is included

Provided further that a statement shall be deemed to be

included in a whitepaper if it is contained therein or in any document

or information referred to therein or issued therewith.

(2) No person shall be liable under this article if -

(a) he proves that he believed and had reasonable

grounds to believe, that the statement was true; or

(b) on becoming aware of the untrue statement, he

immediately gave reasonable public notice in terms of article

9(2) of the untruthfulness of the statement.

(3) No person shall be liable for statements made in the

summary referred to in the First Schedule, including the translation

thereof, except when such statements are misleading, inaccurate or

inconsistent, when read together with the other parts of the

whitepaper, or if it does not provide, when read together with the

other parts of the whitepaper, key information in order to aid

investors when considering whether to invest in such virtual financial

assets. The summary shall contain a clear warning to that effect.

The offering of virtual financial assets, or the admission to

trading on a DLT exchange, in a country outside Malta shall be

subject to the laws of that country.

(1) Without prejudice to any other powers of the

competent authority under other provisions of the Act, the competent

authority shall also have the power to

(a) require the inclusion in the whitepaper,

advertisements or the issuer’s website, as applicable, of

supplementary information necessary for investor protection as

the competent authority may specify;

(b) require the amendment in the whitepaper,

advertisements or the issuer’s website, as applicable, of any

information necessary for investor protection as the competent

authority may specify;

(c)

suspend an initial VFA offering or the trading on a

VFA exchange or prohibit or suspend advertisements if the

competent authority, in its reasonable discretion, believes or

suspects that a provision of this Act has been infringed;

(d) prohibit an initial VFA offering or trading on a VFA

exchange if the provisions of this Act have been infringed or if

the competent authority, in its reasonable discretion, believes or

suspects that they have been or could be infringed; and

(e)

make public the fact that an issuer is failing to

comply with his obligations under any provision of the Act and

may disclose measures or sanctions imposed on any person

responsible for the issue, circulation or distribution of a

whitepaper,

unless

such

disclosure

would

cause

disproportionate damage to the persons involved.

(2) Where a person under sub-article (1) is an issuer within the

meaning found under this Act, the reference to "VFA exchange" shall

be read as a reference to "DLT exchange".

PART III

Licensing Requirements

(1) No person shall provide, or hold itself out as Licensing and

providing, a VFA service in or from within Malta unless such person determination

requirement.

is in possession of a valid licence granted under this Act by the

competent authority

Provided that, in so far as a determination has not already

been made in terms of article 3, a person under this sub-article shall

make a determination as to whether a DLT asset in relation to which it

provides, or holds itself out as providing, a VFA service falls within

the meaning of a virtual financial asset.

(2) The competent authority may by notice in writing to any

person determine that -

(a)

an activity constitutes a VFA service; or

(b) a DLT asset qualifies as a virtual financial asset, a

virtual token, electronic money or a financial instrument, and

whether or not issued in Malta; or

(c)

a VFA service is provided in or from within Malta;

or

(d) an initial VFA offering has been/is being made in or

from within Malta

Provided that the competent authority’s determination

shall be subject to any appeal in terms of article 51.

PART IV

Application, Grant, Cancellation etc. of Licences

(1) An application for a licence under this Act shall be Application for

made solely through a VFA agent which is duly registered in terms of a licence.

this Act in the form and manner required by the competent authority

and shall furthermore -

(a) contain or be accompanied by such information and

documentation, in addition to those required by this article, as

the competent authority may require or as may be prescribed;

(b) be verified in the manner and to the extent required

by the competent authority, or as may be prescribed;

(c)

contain the address in Malta for service on the

applicant of any notice or other document required or authorised

to be served on it by or under this Act;

(d) be accompanied by a programme of operations

setting out the systems, security access protocols and any other

matters as may be required to be set out by the competent

authority from time to time; and

(e)

be accompanied by such fee as may be prescribed in

respect of the licence applied for, which fee shall not be

refundable.

(2) An application for a licence under this Act may only be

withdrawn by written notice to the competent authority at a time

before it has been granted or refused.

(3) The VFA agent shall be required, diligently and with utmost

good faith, to submit full and correct information whenever it is

required to do so, to support the competent authority in carrying out its

reviews to establish that the applicant is a fit and proper person to

provide the VFA services concerned and will comply with and

observe the requirements of this Act and any regulations made and

rules issued thereunder and which are applicable to it

Provided that article 7 shall apply to VFA agents appointed

in terms of this article mutatis mutandis.

(1) The competent authority may grant or refuse to

grant a licence applied for under this Act

Provided that the competent authority shall only grant a

licence upon being satisfied that the conditions laid down in this

article have been met and such licence may be general or may be

restricted to particular specified VFA services.

(2) The conditions referred to in sub-article (1) shall consist of

the following and shall be satisfied on an ongoing basis

(a)

the applicant is a fit and proper person to provide the

VFA services concerned and that the applicant will comply with

and observe the requirements of this Act and any regulations

made and rules issued thereunder and which are applicable to it;

(b) where the applicant is a natural person, such person

is resident in Malta;

(c)

where the applicant is a legal person

(i) it is constituted either in Malta, in accordance

with the laws of Malta, or in a recognised jurisdiction

Provided that where the applicant is constituted

in a recognised jurisdiction, it shall abide with any local

presence requirements prescribed or as may be

prescribed; and

(ii) its purposes or objects are limited to acting as a

licence holder and carrying on activities ancillary or

incidental thereto, and do not include purposes or

objects which are not compatible with the VFA services

of a licence holder.

For the purposes of this sub-paragraph, a

purpose or object referring to any activity that requires

any kind of authorisation whatsoever by the competent

authority under any Maltese law, other than this Act,

shall be deemed to be incompatible with the VFA

services of a licence holder

Provided that where a licence holder proposes

to engage in business activities which are not listed in

the Second Schedule and are not compatible within the

meaning of this sub-paragraph, the licence holder shall

be required to establish a separate entity; and

(iii) its actual activities are compatible and

connected with the VFA services of a licence holder.

(3) (a)

In granting a licence the competent authority may

subject it to such conditions as it may deem appropriate and having

granted a licence it may, from time to time, vary or revoke any

condition so imposed or impose new conditions.

(b) For the better carrying out of the provisions of this

Act, the competent authority may, from time to time, issue and

publish rules which shall be binding on licence holders and others as

may be specified therein. Such rules may lay down additional

requirements, conditions and, or exemptions in relation to activities

of licence holders and any other matters as the competent authority

may consider appropriate

Provided that different rules may be issued by the

competent authority with respect to different classes or categories of

applications.

(4) Without prejudice to the generality of sub-articles (1) and

(2), where a VFA exchange is managed or operated by a VFA

exchange operator other than the VFA exchange itself, the competent

authority shall establish by means of rules how the different

obligations are to be allocated between the VFA exchange and the

VFA exchange operator.

(5) When considering whether to grant or refuse to grant a

licence the competent authority shall, in particular, have regard to -

(a)

the protection of investors and the general public;

(b) the protection of the reputation of Malta taking into

account Malta’s international commitments;

(c)

the promotion of innovation, competition and

choice; and

(d) the reputation and suitability of the applicant and all

other parties connected with the applicant.

(6) Every licence shall specify the VFA service or services

which the holder thereof has been licensed to provide and shall state

the date on which it shall take effect.

(7) Without prejudice to the generality of sub-article (2), the

conditions to which the competent authority shall subject a licence

may be made applicable, or be prescribed to be applicable, to -

(a)

all licences;

(b)

certain categories of licences;

(c)

all licences granted to certain categories of licence

holders;

(d)

all licences in relation to particular VFA services.

(8) Any requirement in this Act that a person be a fit and

proper person to carry out certain activities or functions shall be

interpreted as a requirement not only that such person be a fit and

proper person to carry out such activities or functions, but also that

any beneficial owner, qualifying holder, member of the board of

administration and any other person who will effectively direct the

business of the licence holder be a fit and proper person to carry out

such activities or functions.

(9) Where a licence holder proposes to engage in business

activities not listed in the Second Schedule but compatible within the

meaning of sub-article (2)(c)(ii), the competent authority may require

the establishment of a separate entity, where the proposed activities

may in the opinion of the competent authority impair or threaten to

impair either the financial soundness of the licence holder or the

ability of the competent authority to monitor the licence holder’s

compliance with all the obligations laid down in this Act or any

regulations and rules issued thereunder.

(1) The competent authority shall establish a public Register of

register of all licence holders. This register shall also indicate the licence holders.

VFA services in relation to which each licence was issued.

(2) Such register shall be publicly available for consultation,

shall be accessible online and shall be updated on a regular basis.

The competent authority shall refuse to grant a licence Where the

competent

under this Act in any of the following instances

authority shall

refuse to grant a

licence.

(a) if the application is not submitted in accordance

with the established form or in accordance with applicable

procedure; or

(b)

if the applicable fees have not been paid; or

(c)

if the competent authority, in its reasonable

discretion, is not satisfied that the applicant and all relevant

persons mentioned in article 15(8) are fit and proper; or

(d) if it transpires that any information or submission

made to the competent authority is materially false, misleading,

inaccurate or incomplete; or

(e)

if the competent authority, in its reasonable

discretion, is not satisfied that -

(i) the applicant has sound and prudent

management, robust administration arrangements and

adequate internal control or security mechanisms

Provided that such arrangements, procedures

and mechanisms shall be comprehensive and

proportionate to the nature, scale and complexity of the

VFA services to be provided by the applicant; or

(ii) where there are close links between the

applicant and another person or persons, such links will

not through any law, regulation, administrative provision

or in any other manner prevent it from exercising

effective supervision of that applicant under the

provisions of this Act or any rule

Provided that the competent authority may from

time to time, by means of rules issued under this Act

define the circumstances in which "close links" are to be

regarded as existing between any two or more persons;

or

(iii) the applicant will comply with all regulatory

requirements applicable to licence holders of the

relevant category, including those listed in article 23,

and with any additional requirements that the competent

authority considers necessary; or

(iv) that the VFA service or services being proposed

is compliant with any law, regulations or rules in force;

or

(f)

if the competent authority, in its reasonable

discretion, believes that granting a licence to the applicant may

pose a risk to investors, the general public, the reputation of

Malta or the promotion of innovation, competition and choice;

(g) if sufficient information as requested by the

competent authority has not been provided.

The burden of proving -

(a) the person’s qualification to hold a licence or to

continue holding a licence; and, or

(b)

the determination in terms of the proviso to article

13(1),

shall rest at all times on the applicant or the licence holder, as the case

The granting of a licence is a concession and a revocable

privilege, and no holder thereof shall be deemed to have acquired any

vested rights therein or thereunder.

A licence granted by the competent authority under this Assignment and

Act or a qualifying holding or beneficial ownership in a licence transferability.

holder may not be assigned or transferred in any way whatsoever to

any other person without the prior written consent of the competent

authority, and any such assignment or transfer to any other person

without the competent authority’s consent shall be considered null

and void and constitute sufficient grounds for the competent authority

to cancel that licence.

(1) The competent authority may at any time cancel or Power of

competent

suspend a licence in accordance with the provisions of this Act.

authority to

cancel or

suspend

(2) Without prejudice to the generality of sub-article (1), the licences.

competent authority may cancel or suspend a licence -

(a)

if it considers that the holder thereof is not a fit and

proper person to provide the VFA service he is authorised to

provide; or

(b) if it considers that the holder thereof does not fulfil

the requirements of, or has contravened, any of the provisions of

this Act or of any regulations made or rules issued thereunder,

or has failed to satisfy or comply with any obligation or

condition to which he or the licence is subject by virtue of or

under this Act; or

(c)

if the competent authority has been furnished by or

on behalf of the licence holder with information which is false,

inaccurate or misleading, or if the licence holder has obtained

the licence by making false statements or by any other irregular

means; or

(d) if the licence holder has not commenced to provide

the VFA service he has been authorised to provide within twelve

months from the date of issue of the licence or has ceased to

provide such VFA service; or

(e)

if it considers it desirable to cancel or suspend the

licence for the protection of investors and the general public,

and the reputation of Malta taking into account Malta’s

international commitments; or

(f)

at the request of the licence holder; or

(g)

if the licence holder is declared bankrupt or goes

into liquidation or makes a composition with its creditors or is

otherwise dissolved; or

(h) if the licence holder has ceased to operate as a result

of a merger with another licence holder; or

(i)

in any of the circumstances under which the

competent authority would have been precluded from issuing

the licence under this Act or where under this Act it would have

been entitled to refuse the grant of such licence; or

(j)

after proper communication and investigation, at the

written request of another competent regulatory authority which

is carrying regulatory functions in relation to the relevant

licence holder.

(3) The competent authority, where so required, shall notify

the appropriate ESA and any other competent regulatory authority

which is carrying out regulatory functions in relation to the relevant

licence holder of any cancellation of a licence in terms of sub-article

(1).

(1)

Where the competent authority proposes -

(a)

to vary any condition to which the licence is subject

or to impose a condition thereon; or

(b) to refuse an application for a licence or to cancel or

suspend a licence,

it shall give the applicant or the licence holder, as the case may be,

notice in writing of its intention to do so, setting out the reasons for

the decision it proposes to take.

(2) Every notice given under sub-article (1) shall state that the

recipient of the notice may, within such reasonable period after the

service thereof as may be stated in the notice, make representations in

writing to the competent authority giving reasons why the proposed

decision should not be taken, and the competent authority shall

consider any representation so made before arriving at a final

decision.

(3) The competent authority shall as soon as practicable notify

its final decision in writing to any of the persons to whom notice is to

be given under sub-article (1).

PART V

Board of Administration and Obligations of Licence Holders

(1) Licence holders shall comply with and observe any Applicable

applicable regulations made and rules issued under this Act, including requirements

and compliance

with reference to prudential requirements, and shall be considered as with

Prevention of

subject persons.

Money

Laundering Act.

For the purposes of this sub-article, the term "prudential

requirements" shall include requirements on administration,

compliance, risk management, systems and security access protocols,

financial resources, capital adequacy, professional indemnity

insurance and any other related requirements included in the

regulations made or rules issued under this Act.

(2) Without prejudice to the generality of sub-article (1), a

licence holder shall ensure that all of its systems and security access

protocols are maintained at all times to appropriate high standards.

(1)

The licence holder shall ensure that -

Board of

administration.

(a) members of its board of administration shall at all

times be of sufficient good repute, possess sufficient collective

knowledge, skills and experience and commit sufficient time to

perform their duties and be able to understand the licence

holder’s activities, including the main risks. In this regard, the

licence holder shall devote adequate human and financial

resources to the induction and training of members of its board

of administration;

(b) the number of positions as administrator which may

be held by a member of its board of administration at the same

time shall take into account individual circumstances and the

nature, scale and complexity of the licence holder’s activities;

and

(c)

each member of its board of administration shall act

with honesty, integrity and independence of mind to effectively

assess and challenge the decisions of the senior management

where necessary and to effectively oversee and monitor

management decision-making.

(2) The board of administration of the licence holder, or the

licence holder itself in the case of an individual, shall be vested with

the responsibility to abide by all requirements under this Act and any

regulations made and rules issued thereunder

Provided that the board of administration or the licence

holder itself, as applicable, shall not be held responsible when they

prove that they have acted in good faith pursuant to their fiduciary

obligations and in terms of applicable legislation.

(1) The licence holder shall provide the competent

authority with particulars in writing of any changes in the information

provided under this Act as soon as such licence holder becomes aware

of such changes and shall notify the competent authority, on a

continuous basis, of any changes or circumstances which give rise to

the existence of close links within the meaning in article 17(e).

(2) Notwithstanding the generality of sub-article (1), any

substitutions or amendments which refer to upgrades, maintenance,

innovative evolution or mere replacement of operating systems shall

be notified to the competent authority where they have, or have the

potential to have, a material impact on investors or they are not in any

manner in accordance with any provision of this Act

Provided that the competent authority may issue rules in

terms of article 15(3)(b) in order to prescribe mandatory notification

in general or provide guidelines in particular cases.

Every licence holder shall pay to the competent authority

such periodic fee, and within such time, as may from time to time be

prescribed.

(1) Licence holders shall act honestly, fairly and

professionally and shall comply with the requirements laid down in

this Act and any regulations made and rules issued thereunder, as well

as with other legal and regulatory requirements as may be applicable.

(2) A licence holder shall be subject to fiduciary obligations as

established in the Civil Code, in so far as applicable.

(1) Notwithstanding anything contained in any other

law, the consent of the competent authority given in writing shall be

required before a person may lawfully -

(a) acquire, directly or indirectly, a qualifying holding

in a licence holder;

(b) increase, directly or indirectly, an existing holding

which is not a qualifying holding so as to cause it to become a

qualifying holding in a licence holder;

(c)

further increase, directly or indirectly, such

qualifying holding in a licence holder as a result of which the

proportion of the voting rights or of the capital held would reach

or exceed twenty per cent (20%), thirty per cent (30%) or fifty

per cent (50%) or so, so that the licence holder, where a

company, would become its subsidiary;

(d) dispose, directly or indirectly, of a qualifying

holding in a licence holder;

(e)

reduce, directly or indirectly, a qualifying holding so

as to cause it to cease to be a qualifying holding; or

(f)

reduce, directly or indirectly, a qualifying holding so

that the proportion of the voting rights or of the capital held

would fall below twenty per cent (20%), thirty per cent (30%) or

fifty per cent (50%) or so, so that the licence holder, where a

company, would cease to be its subsidiary.

(2) Without prejudice to the other provisions of this Act and

notwithstanding anything contained in any other law, and without

prejudice to sub-article (1), the consent of the competent authority

given in writing shall be required before a licence holder may

lawfully -

(a)

sell or dispose of its business or any significant part

thereof;

(b) merge with any other company, whether licensed

under this Act or not

Provided that for the purposes of this sub-article, no

merger with a company that requires registration or any other

kind of authorisation whatsoever by the competent authority

under any Maltese law, other than this Act, or which holds any

other equivalent authorisation by a European or overseas

regulatory authority shall be permissible under this Act;

(c)

undergo any reconstruction or division; or

(d) increase or reduce its capital or effect any material

change in voting rights.

(3) It shall be the duty of all members of the board of

administration of a licence holder to notify the competent authority

immediately upon becoming aware that such person or licence holder

intends to take any of the actions set out in sub-articles (1) and (2).

(4) Upon receipt of such notification or receipt of such

information as the competent authority may lawfully require,

whichever is the later, the competent authority shall issue a notice -

(a) granting unconditional consent to the taking of the

action; or

(b) granting consent to the taking of the action subject

to such conditions as the competent authority may deem

appropriate; or

(c)

refusing consent to the taking of the action, and if it

refuses to grant consent, it shall inform the person or the licence

holder concerned in writing for the reason for its refusal.

(5) In assessing the notification and the information referred to

in this article, the competent authority shall, in order to ensure the

sound and prudent management of the licence holder in which an

acquisition is proposed, and having regard to the likely influence of

the proposed acquirer on the licence holder, assess the suitability of

the proposed acquirer and the financial soundness of the proposed

acquisition in accordance with the following criteria

(a)

the reputation of the proposed acquirer;

(b) the reputation, knowledge, skills and experience, as

set out in article 24(1)(a), of any member of the board of

directors and any member of senior management who will direct

the business of the licence holder as a result of the proposed

acquisition;

(c)

the financial soundness of the proposed acquirer, in

particular in relation to the type of business pursued and

envisaged in the licence holder in which the acquisition is

proposed;

(d) whether the licence holder will be able to comply

and continue to comply with the prudential requirements based

on this Act and any regulations made and rules issued

thereunder and, where applicable, other European Union laws,

including whether the group of which it will become a part has a

structure that makes it possible to exercise effective supervision,

effectively exchange information among the competent

authority and the overseas regulatory authorities and determine

the allocation of responsibilities among the competent authority

and the overseas regulatory authorities;

(e)

whether there are reasonable grounds to suspect that,

in connection with the proposed acquisition, money laundering

or terrorist financing within the meaning of Article 1 of

Directive 2015/849/EU is being or has been committed or

attempted, or that the proposed acquisition could increase the

risk thereof.

(6) If any person or any licence holder takes or decides to take

any action set out in sub-article (1) or (2) without obtaining the

consent of the competent authority, then, without prejudice to any

other penalty which may be imposed under this Act, the competent

authority shall have the power to make an order

(a) restraining such person or licence holder from

taking, or continuing with, such action;

(b)

declaring such action to be null and void;

(c)

requiring such person or licence holder to take such

steps as may be necessary to restore the position existing

immediately before the action was taken;

(d) restraining such person or licence holder from

exercising any rights which such action would, if lawful, have

conferred upon them; or

(e)

restraining such person or licence holder from

taking any similar action or any other action within the

categories set out in sub-articles (1) and (2).

(1) No person, other than licence holders, may issue or Advertisements.

cause to be issued an advertisement relating to a VFA service in or

from within Malta unless its contents have been vetted and approved

by the licence holder’s board of administration.

(2) The competent authority may, from time to time, issue

such rules or directives to licence holders as it may consider

appropriate in order to set minimum standards and requirements

which are to be observed by licence holders when issuing or

approving advertisements in accordance with sub-article (1). Such

rules or directives may also include provision for such exemptions or

conditions as may be specified therein and may make different

provision for different cases or classes of cases, under such terms and

conditions as may be prescribed.

(3) The competent authority may impose such conditions,

limitations and restrictions on a licence holder with respect to the

issue or approval of advertisements, as it may consider appropriate.

Where the licence holder maintains a website, the person Website.

responsible for the licence holder’s compliance function shall ensure

that its homepage at least contains such information and in such

format as may be required by the competent authority by means of

rules issued under this Act.

Notwithstanding any investigation provided for in this Act,

where a VFA licence holder considers that it is likely to become

unable to meet its obligations, it shall immediately inform the

competent authority in writing.

Without prejudice to any other obligations imposed under

this Act, a licence holder shall be required to submit to the competent

authority on an annual basis a certificate of compliance in the form

and manner required by the competent authority confirming the

licence holder’s compliance with all the obligations laid down in this

Act or any regulations made and rules issued thereunder during the

period concerned

Provided that in the event of a breach of any provision of

this Act, regulations made or rules issued thereunder, the licence

holder shall include the particular breach and any other additional

information as may be required by the competent authority in the

compliance certificate

Provided further that, where the licence holder is an

individual, the licence holder itself shall be required to submit the

compliance certificate to the competent authority.

PART VI

Prevention of Market Abuse

The prohibitions and requirements laid down in this Part

shall apply to acts carried out by any person in Malta or outside

Malta, as prescribed or as may be prescribed by or under this Act or

regulations made or rules issued thereunder, concerning virtual

financial assets that are admitted to trading on a VFA exchange, or for

which a request for admission to trading on such VFA exchange has

been made.

(1) Insider dealing, recommending or inducing another

person to engage in insider dealing, as referred to in this article, shall

constitute an offence when committed intentionally.

(2) It shall also be an offence to attempt to commit any of the

offences referred to in sub-article (1).

(3) Inciting, aiding or abetting any of the offences referred to

in sub-article (1) shall also amount to an offence.

(4) For the purposes of sub-article (1), insider dealing arises

where a person possesses inside information and uses that

information by acquiring or disposing of, for its own account or for

the account of a third party, directly or indirectly, virtual financial

assets to which that information relates.

(5) For the purposes of sub-article (1), recommending that

another person engage in insider dealing, or inducing another person

to engage in insider dealing, arises where the person possesses inside

information and

(a) recommends, on the basis of that information, that

another person acquire or dispose of virtual financial assets to

which that information relates, or induces that person to make

such an acquisition or disposal; or

(b) recommends, on the basis of that information, that

another person cancels or amends an order concerning a virtual

financial asset to which that information relates, or induces that

person to make such a cancellation or amendment

Provided that the use of the recommendations or

inducements amounts to insider dealing where the person using the

recommendation or inducement knows that it is based upon inside

information.

(6) The provisions of this article apply to any person in the

situations or circumstances prescribed or as may be prescribed.

(1) Unlawful disclosure of inside information shall also Prohibition of

unlawful

constitute an offence under this Act when committed intentionally.

disclosure of

inside

information.

(2) Inciting, aiding or abetting the offence referred to in sub-

article (1) shall also amount to an offence.

(3) For the purposes of this article, unlawful disclosure of

inside information arises where a person possesses inside information

and discloses that information to any other person, except in cases

where such disclosure is permitted pursuant to any provisions of this

Act, regulations made or rules issued thereunder.

(4) The provisions of this article apply to any person in the

situations or circumstances prescribed or as may be prescribed.

(5) For the purposes of this Act, the onward disclosure of

recommendations or inducements referred to in article 34(5) amounts

to unlawful disclosure of inside information where the person

disclosing the recommendation or inducement knows that it was

based on inside information.

(6) This article shall be applied in accordance with the laws of

the freedom of the press and the freedom of expression.

(1) Market manipulation, as referred to in this article,

shall constitute an offence in severe cases or when committed

intentionally.

(2) It shall also be an offence to attempt to commit any of the

offences referred to in sub-article (1).

(3) Inciting, aiding or abetting the offence referred to in sub-

article (1) shall also amount to an offence.

(4) For the purposes of this article, "market manipulation"

means the manipulation or attempted manipulation of a virtual

financial asset or a benchmark through the employment of an abusive

strategy that may be carried out by any available means of trading or

other means, as prescribed or as may be prescribed.

Without prejudice to any other obligations under this Act,

regulations made or rules issued thereunder, a VFA exchange shall

have in place effective systems, procedures and arrangements to

monitor and detect market abuse and where it suspects that there may

exist circumstances to indicate that any violation of the provisions

under this Part may have been committed, is being committed or is

likely in the circumstances to be committed, it shall immediately

report such suspicion to the competent authority.

PART VII

Regulatory and Investigatory Powers

(1) The Minister, acting on the advice of the competent

authority, may make regulations to give effect to the provisions of this

Act, and without prejudice to the generality of the foregoing may, by

such regulations, in particular, do any of the following

(a)

amend the definitions contained in this Act;

(b) regulate the activities of issuers, VFA agents and

licence holders, as well as services provided and activities

carried on in conjunction therewith or in relation thereto;

provide for any matter he may deem expedient including the

creation and exercise of rights by or for the benefit of the public,

the imposition of duties and obligations on the issuers, VFA

agents, licence holders or persons responsible for the

management or administration thereof, the regulation of

branches established by licence holders, outsourcing or agency

arrangements and of any fees and, or any other charges imposed

directly or indirectly on investors; prescribe investment

restrictions applicable to retail investors investing or wishing to

invest, as applicable, in virtual financial assets, and for the

purpose of this paragraph "retail investor" shall mean an

investor who is considered to be a retail client in terms of

Article 4(11) of MiFID but shall exclude any retail client who

may be treated as professional on request within the meaning of

Annex II to MiFID; provide for the safekeeping and custody of

the cryptographic keys and for the requirement to appoint a

custodian, and prescribe and regulate in the most extensive

manner the functions, duties, responsibilities and obligations of

the custodian, and for the purpose of this paragraph "custodian"

shall include a sub-custodian; require the keeping of records

with respect to the transactions and financial position of issuers

and licence holders and for the inspection of those records, and

prescribe reporting and disclosure requirements, including the

preparation of periodical reports and the furnishing of those

reports to investors, unitholders and to others;

(c)

establish schemes or other arrangements for the

compensation of investors in cases where licence holders or any

categories thereof as may be specified, are unable to satisfy

their obligations towards investors or claims in respect of any

liability incurred by them in connection with the carrying out of

any activity in regard to which they are licensed, and to regulate

the management and the financing of any such schemes or

arrangements, and the contributions and levies to be paid

thereto, to set the minimum and maximum levels of

compensation payable thereunder and may under such schemes

and arrangements distinguish between different classes of

investors and exclude certain classes from compensation, and to

make provision for the regulation of and for any other aspect

related to such schemes or arrangements and may moreover

provide that such schemes or arrangements as may be

prescribed shall have a legal personality distinct from that of the

contributors thereto and of the competent authority and provide

for the judicial and legal representation thereof; and such

schemes shall be exempt from the payment of income tax as

from the date of establishment of such schemes;

(d)

define the criteria for determining whether a holding

is an indirect holding for the purposes of determining whether a

qualifying holding exists;

(e)

define the criteria for determining whether the

systems and security access protocols of issuers, applicants or

licence holders, as applicable, meet or are maintained to the

appropriate high international standards that may be established

from time to time;

(f)

regulate the promotion or sale by or on behalf of any

issuer or licence holder, and by any means, of an initial virtual

financial asset offering or of a VFA service or of any DLT asset,

including the criteria and procedures for the granting or refusing

of consent by the competent authority pursuant to the provisions

of article 30;

(g) amend the provisions of article 50 on the

circumstances in which auditors are obliged to communicate

information to the competent authority, to prescribe regulations

governing the disclosure by auditors of information pursuant to

article 50 and to establish supervisory and disciplinary

procedures for auditors in respect of their duties under the

provisions of article 50;

(h) regulate the drawing-up, registration, publication

and distribution in Malta of whitepapers relating to offerings,

admission or trading of virtual financial assets on a VFA

exchange where the respective issuer’s head office is located in

a country outside Malta and to make provision for the

recognition of such whitepapers taking into account the

obligations emanating from European legislation or Malta’s

international commitments;

(i)

provide for and regulate the payment by any person

of registration, licence or other fees and such other charges

payable to the competent authority in respect of any matter

provided for, by or under this Act or any regulations made under

this article, as may be prescribed;

(j)

exempt any issuer, VFA agent, licence holder or any

other person, VFA service, DLT asset, whitepaper or

advertisement from any one or more of the provisions of this

Act subject to such variations, additions, adaptations and

modifications as may be prescribed and subject to such

conditions or other requirements, including other forms of

registration, authorisation and notification procedures, as may

be prescribed;

(k) establish prudential requirements for VFA agents

and licence holders; regulate the supervision on a consolidated

basis, provide for the consultation, co-ordination, co-operation

and the sharing and exchange of information with national,

European and other third country regulatory authorities as may

be necessary; provide for the exchange of information with the

ESRB, central banks which are members of the European

System of Central Banks, including the Central Bank of Malta,

exchange of information with ESAs and exchange of

information with other departments of government

administrations in other Member States responsible for the law

on the supervision of institutions, financial institutions and

insurance undertakings and with inspectors acting on behalf of

those departments as may be necessary; provide for the

establishment of colleges of supervisors; provide for the

exercise of powers by the competent authority on issuers, VFA

agents and licence holders, or their effective managers; provide

for the establishment and imposition of administrative penalties

on issuers, VFA agents, licence holders or others as specified

therein or other measures for the contravention of any of the

regulations, and to provide for appeals therefrom to the Tribunal

or any other tribunal that he may prescribe; provide for the

obligations of the competent authority to report to the ESAs and

the European Commission as may be required and specified in

the said regulations;

(l)

provide for reporting and other requirements and

conditions which a person must satisfy, on a continuing and

ongoing basis and to establish the circumstances and the manner

in which requirements and conditions may be varied, suspended

or revoked;

(m) establish centralised or decentralised data

repositories or other arrangements for the collection, recording,

organisation, structuring, storage, adaptation or alteration,

retrieval, consultation, use, disclosure by transmission,

dissemination or otherwise making available, alignment or

combination, restriction, erasure or destruction, in accordance

with European legislation, of such information and

documentation as may be required by subject persons to fulfil

their customer due diligence requirements provided for under

the Prevention of Money Laundering and Funding of Terrorism S.L. 373.01.

Regulations; and to make provision for the regulation of and for

any other aspect related to such data repositories or

arrangements and may moreover provide that such data

repositories or arrangements as may be prescribed shall have a

legal personality distinct from that of the subject persons thereto

and of the competent authority and provide for the judicial and

legal representation thereof;

(n) in consultation with the competent authority, amend

the Second Schedule in order to include any services which relate

to virtual financial assets and which are not listed in the said

Second Schedule and make regulations relative thereto;

(o) transpose, implement and give effect to the

provisions and requirements of Directives, Regulations and any

other legislative measures of the European Union requiring

transposition and, or implementation, as they may be amended

from time to time, including any implementing measures that

may be issued thereunder and relating to DLT assets, issuers,

VFA agents, licence holders and others as may be specified

therein; regulations made under this paragraph, and strictly

related to transposition or implementation as aforesaid, may

provide that any provision of this Act or of any other law shall

not apply to matters falling under the regulations, and that in so

far as any of the provisions of the regulations are inconsistent

with the provisions of this Act or of any other law, such

provisions in any such regulations shall prevail;

(p) provide for arrangements for the investigation of

complaints about issuers, VFA agents or licence holders;

(q) prescribe anything that is to be or which may be

prescribed;

(r)

provide for any matter incidental to or connected

with any of the above.

(2) Regulations made under this article may also contain

provisions for enabling a person who has entered, or offered to enter,

into a VFA agreement with a licence holder to rescind the agreement

or withdraw the offer within such period and in such manner as may

be prescribed, and in particular, but without prejudice to the

generality of the foregoing, may make provision -

(a) for requiring the service of notice with respect to the

rights exercisable under the regulations;

(b) for the restitution of assets and the making or

recovery of payments where those rights are exercised;

(c)

for such other matters as are incidental to or

connected with any of the above.

(3) Regulations made under this article, may be made subject

to such exemptions or conditions as may be specified therein, may

make different provision for different cases, circumstances or

purposes and may give to the competent authority such powers of

adaptation of the regulations as may also be so specified.

(4) Where regulations have been made in terms of this article,

the competent authority may issue rules within the meaning of article

15 for the better carrying out and to better implement the provisions

of the regulations.

(5) Regulations made under this article may impose

(a) administrative penalties which may not exceed one

hundred and fifty thousand euro (€150,000) for each

infringement or failure to comply, as the case may be;

(b) punishments or other penalties in respect of any

contravention or failure of compliance not exceeding a fine

(multa) of fifteen million euro (€15,000,000) or up to three

times the profits made or losses avoided by virtue of the

offence, whichever is the greater, or to imprisonment for a term

not exceeding six years, or both such fine and imprisonment;

and

(c)

administrative penalties and fines higher than one

hundred and fifty thousand euro (€150,000), where deemed

necessary or appropriate for any contravention of or failure of

compliance with any EU Directive or EU Regulation or of any

regulations made under this article to transpose or to give effect

to any EU Directive or EU Regulation.

(6) Regulations made under this Act and any amendment or

revocation of such regulations, may be published in the English

language only.

(7) The exercise of any of the powers assigned under this

article shall be subject to any obligations or rights arising from

Malta’s international commitments.

(1)

The competent authority may, by notice in writing, Power of

competent

require -

authority to

require

information.

(a) any person who is or was providing, or who appears

to be or to have been providing a VFA service as well as any

persons that control them or are controlled by them;

(b)

any issuer, VFA agent, intermediary involved in the

initial VFA offering as well as any persons that control them or

are controlled by them;

(c)

any person who has issued, or appears to have issued

an advertisement falling within the provisions of articles 6 or

(d)

an auditor of a person regulated under this Act;

(e)

any other person who appears to be in possession of

relevant information or documentation,

to do all or any of the following

(i) to furnish to the competent authority, at such

time and place and in such form as it may specify, such

information and documentation as it may require,

including the power to require existing telephone,

existing data traffic and existing DLT records, with

respect to any such service, DLT asset, advertisement or

website as aforesaid, or with respect to any person with

whom the licence holder or VFA agent has close links

within the meaning of article 17;

(ii) to review the determination made in terms of

articles 3 or 13 and confirm in writing the competent

authority that such determination is true and accurate or

otherwise;

(iii) to furnish to the competent authority any

information or documentation aforesaid verified in such

manner as it may specify;

(iv) to attend before the competent authority, or

before a person appointed by it, at such time and place as

it may specify, to answer questions and provide

information and documentation with respect to any such

service, scheme or advertisement as aforesaid

Provided that the powers in this article shall not permit the

competent authority to demand information about source codes of any

proprietary technology or of information of highly sensitive,

intellectual property which is protected by law and which relates to

innovative DLT or smart contracts.

(2) Without prejudice to anything which the competent

authority may require under sub-article (1), all information in respect

of virtual financial assets traded on a VFA exchange and held by the

exchange shall be freely accessible to the competent authority

Provided that the provisions of this sub-article shall also be

applicable where a virtual financial asset is determined by the

competent authority to be electronic money or a financial instrument

in terms of article 13(2)(b).

(3) The competent authority may take copies of any

documents furnished or provided under this article.

(4) Where the person required to provide information or

documentation under this article does not have the relevant

information or documentation, he shall disclose to the competent

authority where, to the best of his knowledge, that information or

documentation is, and the competent authority may require any

person, whether indicated as aforesaid or not, who appears to it to be

in possession of that information or documentation, to provide it.

(5) A statement made and documentation provided in

pursuance of any requirement under this article may be used in

evidence against the person making the statement or providing the

documentation as well as against any person to whom they relate.

(6) The provisions of this article shall not apply to information

or documentation which is privileged in accordance with the

provisions of article 642(1) of the Criminal Code or which refer to Cap. 9.

cryptographic keys belonging to the person required to provide

information or documentation under this article

Provided that the provisions of this sub-article shall not

apply to the actual information protected by the cryptographic keys.

(7) The power to require the production of documentation

under the provisions of this article shall be without prejudice to any

lien or charge claimed by any person in relation to such

documentation.

(8) Where the competent authority has appointed a person

under article 42(1)(c), such person shall, for the purposes of carrying

out his functions under his appointment, have all the powers

conferred on the competent authority by this article and a requirement

made by it shall be deemed to be and have the same force and effect

as a requirement of the competent authority.

(9) Without prejudice to the other provisions of this article, a

licence holder may be required to submit to the Central Bank of Malta

such information as the Bank may reasonably require for the

discharge of its duties under the Central Bank of Malta Act.

(1) The competent authority may, whenever it deems it

necessary or expedient, appoint an inspector or inspectors to

investigate and report on the affairs of any issuers or VFA agents or

licence holders or any other persons referred to in article 39(1).

(2) An inspector appointed under sub-article (1) -

(a) may also, if he thinks it necessary or expedient for

the purposes of that investigation, investigate the affairs of any

person mentioned in sub-article (1);

(b) shall have and may exercise all the powers conferred

on the competent authority by article 39, and any requirement

made by it shall be deemed to be and have the same force and

effect as a requirement of the competent authority;

(c)

may, and if so directed by the competent authority

shall, make interim reports and on the conclusion of his

investigation shall make a final report to the said authority.

(3) The competent authority shall have power to order that all

expenses of, and incidental to, an investigation pursuant to this article

be paid by the persons concerned.

(4) For the purposes of this article, an inspector shall be a

person considered by the competent authority as possessing suitable

expertise to exercise such function.

(1) Without prejudice to any of the powers conferred on

it by articles 39 and 40, the competent authority may, whenever it

deems it necessary, and whether upon a report by an inspector

appointed under article 40 or not, give, by notice in writing, such

directives as it may deem appropriate in the circumstances; and any

person as is referred to in article 39(1) to whom the notice is given

shall obey, comply with and otherwise give effect to any such

directive within the time and in the manner stated in the directive or

further directive.

(2) Without prejudice to the generality of the foregoing

provisions of this article, a directive under this article may -

(a) require anything to be done or be omitted to be

done, or impose any prohibition, restriction or limitation, or any

other requirement, including any requirement emanating from

European Union legislation, and confer powers, with respect to

any offering or trading of DLT assets, VFA service, transaction

or other act, or to any assets, or to any other thing whatsoever;

(b) require that any person having functions in relation

to the issuer, VFA agent or licence holder be prohibited,

temporarily or otherwise, suspended from carrying out activities

under this Act, or removed and replaced by another person

acceptable to the competent authority;

(c)

require an issuer, VFA agent, licence holder or any

person who is or was, or who appears to be or to have been

undertaking an activity or providing a service regulated under

this Act to cease operations and to wind up its affairs, in

accordance with such procedures and directions as may be

specified in the directive, which may provide for the

appointment of a person to take possession and control of all

documents, records and assets belonging to or in the possession

or control of the issuer, VFA agent, licence holder or such other

person;

(d) require a licence holder to submit a financial

recovery plan, as may be determined in the rules, if it considers

that the interests of investors, consumers, creditors or other

interested persons are likely to be prejudiced owing to a

deterioration in the financial position of the licence holder;

(e)

require the removal of a virtual financial asset from

trading on a VFA exchange or the suspension of trading in such

virtual financial asset

Provided that the provisions of this paragraph shall

also be applicable where a virtual financial asset is determined

by the competent authority to be electronic money or a financial

instrument in terms of article 13(2)(b);

(f)

request any person to take steps to reduce the size of

the position or exposure

Provided that in applying the provisions of paragraph (c),

the competent authority may also appoint a competent person to act as

liquidator for the purposes of winding up the affairs of an issuer, VFA

agent or licence holder under this Act; and such person shall be the

liquidator of the issuer, VFA agent or licence holder for all purposes

of law to the exclusion of any other person.

(3) The power to give directives under this article shall include

the power to vary, alter, add to or withdraw any directive, as well as

the power to issue new or further directives.

(4) Where the competent authority is satisfied that the

circumstances so warrant, it may at any time make public any

directive it has given under any of the provisions of this article.

(1) Without prejudice to the powers conferred to the

competent authority under this Act, the competent authority may,

where it is satisfied that sufficient circumstances exist, proceed to

take any one or more of the following measures

(a) appoint a person to advise the issuer, VFA agent or

licence holder in the proper conduct of their business;

(b) appoint a person to take charge of the assets of the

issuer, VFA agent or licence holder, or any portion of them, for

the purposes of safeguarding the interests of investors,

consumers, creditors or, if any, unitholders, of the issuer, VFA

agent or licence holder;

(c)

appoint a person to assume control of the business of

the issuer, VFA agent or licence holder, either to carry on that

business or to carry out such other function or functions in

respect of such business, or part thereof, as the competent

authority may direct;

(d) fix the remuneration to be paid by the issuer, VFA

agent or licence holder to any person appointed under article 41

or under this article;

(e)

do such other act as it may deem appropriate in the

circumstances to give better effect to the implementation of the

provisions of this article,

and, having adopted any one or more of the measures aforesaid, the

competent authority may further proceed in any one or more such

measures, whether in addition thereto or in substitution therefor.

(2) Where a person is appointed by the competent authority -

(a)

under sub-article (1)(a), it shall be the duty of the

issuer, VFA agent or licence holder, as applicable, to act in

accordance with the advice given by such person unless and

until the competent authority, on representation made to it,

directs otherwise;

(b) under sub-article (1)(b), the issuer, VFA agent or

licence holder, as applicable, shall deliver to such person all the

assets, whether movable or immovable, of which he is placed in

charge, and all the powers, functions and duties of the said

issuer, VFA agent or licence holder in respect of those assets,

including, if such issuer, VFA agent or licence holder is a legal

person, those exercisable by the legal person in a general

meeting, or by the members of the board of administration, or

by any other person, including the legal and judicial

representation of such legal person, shall be exercisable by and

vest in the person appointed under the said paragraph to the

exclusion of any other person;

(c)

under sub-article (1)(c), the issuer, VFA agent or

licence holder, as applicable, shall submit its business to the

control of such person and shall provide such person with such

facilities as may be required to carry on that business or to carry

out the functions assigned to such person under the said

paragraph; and all the powers, functions and duties of the said

issuer, VFA agent or licence holder, including, if such issuer,

VFA agent or licence holder is a legal person, those exercisable

by the legal person in a general meeting, or by the members of

the board of administration, or by any other person, including

the legal and judicial representation of such legal person in all

matters, shall be exercisable by and vest in such person to the

exclusion of any other person.

(3) The competent authority may, where it feels it is in the best

interest of the public so to do, make or issue public statements or

notices giving warnings or information about any measure taken in

terms of this article.

(4) The competent authority may require the issuer, VFA agent

or licence holder concerned to pay all the expenses of, and incidental

to, the publication or issue of public statements or notices pursuant to

this article, or such part thereof as it may deem appropriate; and any

sum so due shall be recoverable by the competent authority in the

same manner as an administrative penalty imposed under this Act.

(1) Any officer, employee or agent of the competent Right of entry.

authority, on producing, if required, evidence of his authority, may

enter premises occupied by a person on whom a notice has been

served under article 39 or whose affairs are being investigated under

article 40, for the purpose of obtaining there the information or

documents required by that notice, or otherwise for the purpose of the

investigation, and of exercising any of the powers conferred by the

said articles.

(2) Where any officer, employee or agent of the competent

authority has reasonable cause to believe that if such notice as is

referred to in sub-article (1) were served it would not be complied

with or that any documents to which it could relate would be

removed, tampered with or destroyed, such person may, on

producing, if required, evidence of his authority, enter any premises

referred to in sub-article (1) for the purpose of obtaining there any

information or documents specified in the authority, being

information or documents that could have been required under such

notice as is referred to in sub-article (1).

(3) For the purposes of any action taken under the provisions

of this article, the competent authority may request the assistance of

the Commissioner of Police, who may for such purpose exercise such

powers as are vested in it for the prevention of offences and the

enforcement of law and order.

(1) (a) The competent authority may, in accordance with

rules issued under this Act, and whether of its own motion or at the

request of a VFA exchange on which a virtual financial asset has been

admitted to trading, discontinue or suspend the trading of such virtual

financial asset if it is satisfied that there are circumstances which

warrant such suspension or discontinuance.

(b) Without prejudice to the right of the competent

authority under paragraph (a) to demand suspension or removal of a

virtual financial asset from trading, a VFA exchange operator may

suspend or remove from trading a virtual financial asset which no

longer complies with the definition of a virtual financial asset or the

bye-laws of the VFA exchange unless such a step would be likely to

cause significant damage to the investors’ interests or the orderly

functioning of the VFA exchange. The VFA exchange operator that

suspends or removes from trading a virtual financial asset shall make

public this decision and communicate the relevant information to the

competent authority. Where required, the competent authority shall

inform the European regulatory authorities of the other Member

States or EEA States of this decision.

(c) When the competent authority demands the

suspension or removal of a virtual financial asset from trading on one

or more VFA exchanges, it shall immediately make public its decision

and inform any regulatory authority, as required, pursuant to the

obligations emanating from European legislation or Malta’s

international commitments.

(d) A VFA exchange operator that suspends or

removes from trading a virtual financial asset shall also suspend or

remove any derivatives thereof which relate or are referenced to that

virtual financial asset as may be necessary to support the objectives of

the suspension or removal of the underlying virtual financial asset.

The VFA exchange operator shall make public its decision on the

suspension or removal of the virtual financial asset and of any related

derivatives and communicate the relevant decisions to the competent

authority

Provided that the term "derivatives" in this

paragraph shall exclude the derivatives as referred to in points (4) to

(10) of Section C of Annex I to MiFID.

(e) Paragraph (d) shall also apply when the

suspension from trading of a virtual financial asset or derivatives

thereof which relate or are referenced to that virtual financial asset is

lifted.

(f) The notification procedure referred to in

paragraph (d) shall also apply in the case where the decision to

suspend or remove from trading a virtual financial asset or derivatives

thereof which relate or are referenced to that virtual financial asset is

taken by the competent authority.

(2) If the trading of any virtual financial asset is suspended

under sub-article (1) such virtual financial asset may still be treated as

being traded on a VFA exchange for such purposes as may be set out

in rules issued under this Act.

(3) If the competent authority discontinues or suspends the

trading of any virtual financial assets, the issuer shall have a right of

appeal to the Tribunal in terms of article 51.

(4) This article shall also be applicable where a virtual

financial asset is determined by the competent authority to be

electronic money or a financial instrument in terms of article

13(2)(b).

(1)

If the competent authority -

Notice of

discontinuation

or suspension.

(a) proposes to discontinue or suspend the trading of a

virtual financial asset on a VFA exchange; or

(b) decides to suspend the trading of a virtual financial

asset on a VFA exchange with immediate effect,

it must give the issuer of such virtual financial asset notice in writing

Provided that a notice under this sub-article shall not be

required when a virtual financial asset has been admitted to trading

irrespective of the issuer’s will.

(2) The discontinuance or suspension of the trading of a

virtual financial asset shall take effect immediately or on such date as

may be specified in the notice under sub-article (1).

(3) A notice given under sub-article (1) shall -

(a)

give details of the discontinuance or suspension;

(b) state the competent authority’s reason for the

discontinuance or suspension, provided that the interest of a

VFA exchange or the interest of the public or the investors shall

constitute sufficient reason;

(c)

inform the issuer of a virtual financial asset that he

may make representations to the competent authority within

such period as may be specified in the notice; and

(d) inform the issuer of the date on which the

discontinuance or suspension will take effect or of the date on

which the suspension took effect if the notice under sub-article

(1) states that suspension is to take place with immediate effect

Provided that the obligation to give notice of a decision to

suspend the trading of a virtual financial asset and the right of the

issuer to make representations in relation thereto shall be without

prejudice to the power of the competent authority to suspend the

trading of any virtual financial assets with immediate effect.

(4) The competent authority may extend the period within

which representations may be made to it.

(5) If having considered any representations made by the

issuer of a virtual financial asset the competent authority decides -

(a) to discontinue or suspend the trading of a virtual

financial asset; or

(b)

if the suspension has taken effect, not to cancel it,

the competent authority shall give the issuer of a virtual financial

asset notice in writing of its decision.

(6) If the competent authority decides to discontinue or

suspend the trading of a virtual financial asset, or if the suspension

has taken effect, not to cancel it, the issuer of the virtual financial

asset concerned shall have a right of appeal to the Tribunal and a

notice given under sub-article (5) shall inform the issuer of his right

to refer the matter to the Tribunal.

(7) The effect of cancelling a discontinuance is that the virtual

financial asset concerned is to be re-admitted to trading on the VFA

exchange on which it had been admitted to trading.

(8) The provisions of this article shall also be applicable where

a virtual financial asset is determined by the competent authority to

be electronic money or a financial instrument in terms of article

13(2)(b).

(1) Without prejudice to the provisions of article 45, the Temporary

competent authority shall have the power to suspend temporarily the suspension

trading on a

trading in a virtual financial asset on any VFA exchange, if in its VFA exchange.

opinion, the orderly transaction of business is being prevented, or is

likely to be prevented.

(2) The Minister may recommend to the competent authority

the temporary suspension of trading if he is of the opinion that the

orderly transaction of business of a VFA exchange is being disrupted

because of any occurrence which in the opinion of the Minister merits

such closure.

(3) The competent authority may order that, for such time as it

may determine, no trading of any kind may be transacted in one or

more specified virtual financial assets if it has reason to believe that

this would be in the interest of the VFA exchange concerned, the

public or investors in general.

(4) No transaction may be executed at any time in the event of

the temporary suspension of trading under this article. Any

transaction so executed in contravention of this sub-article shall be

invalid.

(5) This article shall also be applicable where a virtual

financial asset is determined by the competent authority to be

electronic money or a financial instrument in terms of article

13(2)(b).

Without prejudice to any other powers assigned to the Power of the

competent authority in terms of this Act, the competent authority competent

authority to

shall introduce a test applicable to issuers, VFA agents and licence introduce test.

holders for the purpose of determining whether a DLT asset qualifies

as electronic money, a financial instrument, virtual financial asset or

virtual token

Provided that such test shall be applicable prior to the

submission of the whitepaper to the competent authority or the

provision of a VFA service, as the case may be.

(1) Without prejudice to any other powers assigned to

the competent authority in terms of this Act, where a licence holder or

the secretary, a member of the board of administration or any other

person responsible for a licence holder contravenes or fails to comply

with any of the conditions imposed in a licence, and, or where the

competent authority is satisfied that a person’s conduct amounts to a

breach of any of the provisions of this Act, regulations made or rules

issued thereunder, including failure to cooperate in an investigation,

the competent authority may by notice in writing and without

recourse to a court hearing impose on the licence holder, secretary,

member of the board of administration and, or any other person as the

case may be, an administrative penalty which may not exceed one

hundred and fifty thousand euro (€150,000) for each infringement or

failure to comply, as the case may be

Provided that the provisions of this sub-article shall apply

to issuers and VFA agents mutatis mutandis.

(2) Administrative penalties or other measures that may be

imposed by the competent authority on issuers, VFA agents, licence

holders or others, as may be specified, may be imposed in the form of

a fixed penalty, a daily penalty, or both.

(3) The imposition by the competent authority of an

administrative penalty in terms of this article shall be without

prejudice to any other consequence of the act or omission of the

offender under civil or criminal law

Provided that in all cases where the competent authority

imposes an administrative penalty in respect of anything done or

omitted to be done by any person and such act or omission also

constitutes a criminal offence, no proceedings may be taken or

continued against the said person in respect of such criminal offence.

(4) The competent authority may, by means of a public

statement, disclose the name of the person sanctioned, the particular

breach of the provision of this Act, regulations made or rules issued

thereunder, and the penalty or administrative measure imposed. The

competent authority shall withhold such public disclosure where it

deems that such disclosure would seriously jeopardise the financial

markets, be detrimental to the interests of investors or consumers or

cause disproportionate damage to the parties involved.

Any decision taken under this Act by the competent

authority, including any rules issued or regulations made thereunder,

shall state the grounds on which such a decision has been based.

PART VIII

Duty of Auditors

(1) A licence holder shall appoint an auditor who shall Auditor’s duty

have the duty to report immediately to the competent authority any to report.

fact or decision of which he becomes aware in his capacity as auditor

of such licence holder which -

(a) is likely to lead to a serious qualification or refusal

of the auditor’s report on the accounts of such licence holder; or

(b) constitutes or is likely to constitute a material breach

of the legal or regulatory requirements applicable to the licence

holders in or under this Act; or

(c)

gravely impairs the licence holder’s ability to

continue as a going concern; or

(d)

relates to any other matter which may be prescribed.

(2) An auditor of a licence holder shall report to the competent

authority any facts or decision as specified in sub-article (1) of any

person having close links with such licence holder within the meaning

in article 17, of which he becomes aware in his capacity as auditor of

the licence holder or of the person having such close links.

(3) No duty (including the duty of professional secrecy) to

which an auditor of the licence holder may be subject, shall be

regarded as contravened by reason of his communicating in good

faith to the competent authority, whether or not in response to a

request from it, any information or opinion on a matter of which the

auditor has become aware in his capacity as auditor of that licence

holder and which is relevant to any functions of the competent

authority under the provisions of this Act or is required to be

communicated by virtue of sub-article (1).

(4) The matters prescribed for the purposes of sub-article

(1)(d) may include matters related to persons other than the licence

holder.

(5) An auditor of a licence holder shall, in the absence of

compelling reasons not to do so, simultaneously report the

information specified in sub-articles (1) and (2), in accordance with

the provisions of sub-articles (3) and (4), to the board of

administration of the licence holder.

(6) An auditor of a licence holder shall report annually to the

competent authority on the licence holder’s systems and security

access protocols in the manner and format required by the competent

authority.

(7) The provisions of this article shall apply to issuers and

VFA agents mutatis mutandis.

PART IX

Appeals, Remedies, Sanctions and Confidentiality

(1) Subject to the provisions of this article and without

prejudice to any other article under this Act, an appeal shall lie to the

Tribunal with respect to

(a)

any decision under article 12(c) and (d);

(b)

any notice in terms of article 13(2);

(c)

any administrative penalty imposed under article 48;

(d) any refusal, variation, cancellation or suspension of

a licence under article 22(3);

(e)

any notice issued or any order made in terms of

articles 28, 44 and 45;

(f)

any decision concerning an advertisement under

articles 6 or 29;

(g)

any punishment or penalty imposed under article

38(5);

(h)

any directive given under article 41; or

(i)

any measure taken in terms of article 42(1), (2) and

(4).

(2) The provisions of article 21 of the Malta Financial

Services Authority Act shall apply mutatis mutandis to appeals that

may be brought before the Tribunal under this article.

(1) If, on an application by the competent authority

made to the court, such court is satisfied -

(a) that there is reasonable likelihood that a person will

contravene any of the provisions of this Act or of any

regulations made or rules issued thereunder, or will contravene

or fail to comply with any condition, obligation, requirement,

rules, directive, or order made or given under any of the

provisions of this Act; or

(b) that a person has contravened any such provision or

has contravened or failed to comply with any such condition,

obligation, requirement, rules, directive, or order and that steps

could be taken to remedy the contravention or failure,

the court may give such orders as it may deem appropriate to restrain

the contravention or, as the case may be, to require the person referred

to in paragraph (a) or (b), or any other person who appears to the

court to have been knowingly concerned in the contravention, to take

such steps as the court may direct.

(2) If, on an application made under sub-article (1), the court

is satisfied that a person has entered into any transaction in

contravention of any of the provisions of this Act, the court may order

that person and any other person who appears to the court to have

been knowingly concerned in the contravention to take such steps as

the court may direct for restoring the parties to the position in which

they were before the transaction was entered into.

(3) If, on an application made under sub-article (1), the court

is further satisfied that -

(a)

profits have accrued to any person as a result of the

contravention; or

(b) an investor has suffered loss or been otherwise

adversely affected as a result of that contravention,

the court may order the person responsible for the contravention to

pay into court such sum as appears to it to be just having regard to the

extent of the profit, loss or adverse effect as aforesaid, and order such

sum to be paid out as the court may direct to the persons who have

entered into transactions as a result of which profits have accrued or

losses or adverse effects have been suffered as aforesaid.

(4) For the purposes of this article the court may order the

production by any person of such accounts and the provision of such

information, and verified in such manner, as the court may deem

appropriate.

(5) The provisions of this article shall be without prejudice to

any right of any aggrieved person to bring proceedings directly in

respect of any right such person may otherwise have independently of

the competent authority.

(1) Without prejudice to any other article under this Act,

any person who contravenes or fails to comply with any of the

provisions of articles 3, 7, 13, 25, 26, 28, 39, 41 or 57 or of article 39

as applied by article 40 or of any court order made under article 52 or

of any regulations made under article 38 shall be guilty of an offence.

(2) Any person who for the purposes of, or pursuant to, any of

the provisions of this Act or of any regulations made thereunder, or

any condition, obligation, requirement, directive or order made or

given as aforesaid, furnishes information or makes a statement which

he knows to be inaccurate, false or misleading in any material respect,

or recklessly furnishes information or makes a statement which is

inaccurate, false or misleading in any material respect, shall be guilty

of an offence.

(3) Any person who is knowingly a party to the carrying on of

any activity regulated under this Act, or any regulations made or rules

issued thereunder, with a fraudulent intent or for a fraudulent purpose,

shall be guilty of an offence.

(4) Any person who by any statement, promise or forecast

which he knows to be misleading, false or deceptive, or by any

dishonest concealment of material facts, or by the reckless making

(whether dishonest or otherwise) of any statement, promise or

forecast which is misleading, false or deceptive, induces or attempts

to induce another person to enter into or offer to enter into a VFA

agreement, shall be guilty of an offence.

(5) Any person who with intent to avoid detection of the

commission of an offence under this Act removes, destroys, conceals

or fraudulently alters any book, document or other paper or record,

either tangible or intangible, shall be guilty of an offence.

(6) Any person who intentionally obstructs a person from

exercising rights conferred by this Act shall be guilty of an offence.

(1) An issuer or a licence holder, other than a licence

holder referred to in sub-article (2), guilty of an offence under the

provisions of article 53 shall be liable on conviction to a fine (multa)

not exceeding ten million euro (€10,000,000) or up to three times the

profits made or losses avoided by virtue of the offence, whichever is the

greater, or to imprisonment for a term not exceeding six years, or both

such fine and imprisonment, unless such fine or term of imprisonment

is otherwise imposed under article 38(5).

(2) A VFA agent guilty of an offence under the provisions of

article 53 shall be liable on conviction to a fine (multa) not exceeding

five hundred thousand euro (€500,000) or to imprisonment for a term

not exceeding six months, or both such fine and imprisonment, unless

such fine or term of imprisonment is otherwise imposed under article

38(5).

Where obligations imposed in terms of the Act or any Sanctions on

regulations made or rules issued thereunder apply to the issuer, VFA members

body of

agent, licence holder or to any other legal entity, in the event of a administration

of the legal

breach, sanctions can also be applied, subject to the conditions laid entity.

down in national law, to the members of the body of administration of

the legal entity concerned, and to other individuals who are

responsible for the breach under national law.

(1) If it appears to the competent authority that a person Public statement

who holds or who held a licence, or registration, or any other person, as

misconduct.

has contravened any of the provisions of this Act or of any

regulations made under this Act or has contravened or failed to

comply with any condition, obligation, requirement, rules, directive

or order made or given under any of the provisions of this Act, the

competent authority may publish a statement to that effect.

(2) Nothing in this article shall restrict or otherwise prejudice

the powers of the competent authority under article 41(4).

(1) Information obtained by the competent authority or Confidentiality.

by its officers, employees or agents, as well as by auditors, inspectors

or any other persons engaged by the competent authority for the

purposes of, or pursuant to, any of the provisions of this Act, or of

any regulations made or rules issued thereunder, or in the discharge of

any functions under any of the said provisions, shall be treated as

confidential and protected by the duty of professional secrecy, and

shall not be disclosed to any other person, except in the following

cases

(a) where the disclosure is required for the detection,

prevention or prosecution of criminal offences under the

criminal provisions of this Act or any other law;

(b) where the information is disclosed with a view to the

institution of, or otherwise for the purposes of any proceedings

by the competent authority before any court under this Act;

(c)

where the information is disclosed in civil or

commercial proceedings in relation to the bankruptcy or

dissolution and consequential winding up by the court of an

issuer, VFA agent or licence holder, provided such information

does not concern third parties and is necessary for the carrying

out of the proceedings, or is disclosed to an overseas body

responsible for the liquidation and bankruptcy of a person

holding a licence or an equivalent authorisation from a

European regulatory authority or an overseas regulatory

authority;

(d) where a summary or collection of the information is

prepared or supplied in such a way as not to enable the identity

of any persons, to whom the information relates to be

ascertained;

(e)

where the information is disclosed to an auditor

where such disclosure would assist it in the exercise of his

functions under article 50;

(f)

where the information is provided to the Central

Bank of Malta or to the Listing Authority under the Financial

Markets Act in the exercise of their respective functions in

terms of law;

(g) where the information is provided to such other

local or European or overseas regulatory, judicial or

enforcement authorities in the pursuance of serious concerns of

a regulatory or criminal nature

Provided that the provisions of this article shall not prevent

the competent authority from exchanging or transmitting confidential

information belonging to issuers or licence holders to ESAs or the

ESRB

Provided further that the provisions of this article shall not

prevent the competent authority from using such information for

other purposes where the body or person communicating information

to the competent authority consents thereto.

(2) The provisions of this article shall not preclude the

competent authority from transmitting to the Central Bank of Malta,

the ESCB and the ECB, in their capacity as monetary authorities, and,

where appropriate, to recognised clearing houses or other similar

body performing clearing or settlement services, and to other public

authorities responsible for overseeing payment and settlement

systems, confidential information intended for the performance of

their functions. Likewise, the competent authority shall be entitled to

the receipt of such information as it may require for the purpose of

performing its functions under the Act.

(3) Where an officer or an employee of an issuer, VFA agent

or licence holder has reason to believe that a transaction or a proposed

transaction could involve money laundering or the funding of

terrorism, he shall act in compliance with the reporting and other

obligations set out in the regulations made under article 12 of the

Prevention of Money Laundering Act and any procedures and Cap. 373.

guidance issued thereunder, and such disclosure shall not constitute a

breach of confidentiality.

PART X

Miscellaneous Provisions

(1) The competent authority, including the members of Exclusion of

the board of administration when acting in any function assigned to liability.

the board under any provision of this Act, any body including any

council or committee established by this Act and any member, officer

or employee of that body, the officers and employees of the

competent authority and any other person appointed to perform a

function under this Act, shall not be liable in damages for anything

done or omitted to be done in the discharge or purported discharge of

any such function or otherwise in the exercise of their official duties,

unless the act or omission is shown to have been done or omitted to

be done, as the case may be, through wilful misconduct.

(2) For the purposes of this provision "this Act" shall include

any other Act administered by the competent authority and any

regulations made or rules issued thereunder.

A notice or other document to be given or served under Notices, etc.

this Act, or any rules issued or regulations made thereunder, shall be

deemed to have been duly given or served on a person if -

(a)

it has been delivered to it; or

(b) it has been left at the address furnished by it to the

competent authority, or to his last known address; or

(c)

if it has been sent to it by post or by telefax at any of

the aforesaid addresses; or

(d) in the case of a body of persons, whether corporate

or unincorporate, if it has been given or served in any of the

manners aforesaid to or on a secretary, clerk, manager or their

equivalent, or to any member of the board of administration or

an appointed representative.

Where a licence holder wishes to carry on the respective European right.

activities in a Member State or EEA State, in exercise of a European

right, such right shall be subject to -

(a) a prior notification to the competent authority in

accordance with regulations made and rules issued under this

Act; and

(b)

the laws of that Member State or EEA State.

The competent authority shall cooperate with the ESAs

and other European, overseas and national regulatory authorities

whenever necessary and in accordance with any applicable European

or Maltese law or Malta’s international commitments, as the case may

PART XI

Transitory Provisions

(1) Any person who, on the date of the coming into

force of this Act -

(a) is undertaking an activity in terms of article 3 shall,

within three months from the date of coming into force of this

Act, draw up a whitepaper and register it with the competent

authority in terms of the said article

Provided that this paragraph shall be applicable only

to those persons who have commenced an offering or have

applied for admission to trading in terms of article 3 by not earlier

than two weeks prior to the coming into force of this Act;

(b) is providing the services of a VFA agent within the

meaning found under this Act, shall, within one month from the

date of coming into force of this Act, apply to the competent

authority for registration in terms of article 7;

(c)

is providing a VFA service within the meaning

found under this Act shall, within twelve months from the date

of coming into force of this Act, apply to the competent

authority for licence in terms of article 14.

(2) A person under sub-article (1) may, subject to a prior

notification to the competent authority of the activity it is undertaking

and, or service or services it is providing, immediately upon the coming

into force of this Act, continue to undertake such activity or provide

such service or services in or from within Malta until the whitepaper

has been registered with, or the application has been determined by,

the competent authority and, in so doing, is not to be regarded as

carrying on such activity or providing such service in contravention

of this Act.