Financial institutions operate in a heavily regulated environment. Therefore, it is crucial that we understand and anticipate the impact of regulatory and legislative developments and appraise their impact on our business and our clients.


The mission of a regulator in the financial industry is to augment public value, amplify the integrity and stability of the local and global market and to promote a fair competitive market environment. Regulators are proactive in monitoring the trends in the financial market and in identifying potential risks and indicators of misconduct at an early stage. They address such risks to the benefit of the general public and the financial market at large.

Regulators have a high supervisory role which makes it crucial to have a risk-based supervisory approach as a key to enhance the effectiveness of its role. Another important responsibility is to keep up with how the market is evolving and ensure that regulations cater to such innovative markets, whilst securing that their approach keeps pace with such changes.

Regulator’s banking supervision is responsible for the oversight of all licensed banking activities which includes non-bank financial institutions (e.g payments institutions). This includes off-site and on-site examinations of all licensed institutions applying a risk-based approach. The goal is to make sure that these licensed institutions comply with all regulations and license conditions and have the necessary corporate governance and control structures in place.

Payment services companies have found solutions that truly offer a better customer experience than those offered by traditional banks. They must comply with the same regulations as applicable to the traditional banks and regulators should ensure that payment institutions are subject to the same rules in important areas such as cybersecurity, privacy and anti-money laundering procedures.


PAYTAH Payment Solutions (Phoenix Payments Ltd) is a regulated financial institution, licensed by the Malta Financial Authorities (MFSA) to provide payment services across all 28 EU and EEA member states. We operate under the legal framework of the PSD2.


Consumers that already familiar with using non-banking payment services are feeling safe knowing their provider is duly authorized and registered and is being supervised by the financial authority in the home country of the provider.

A licensed payment institution is following EU regulations, including anti-money laundering, fraud prevention, terrorist financing, etc and is operating in accordance with all applicable laws and regulations. This provides customers the certainty that the provider offers trustworthy solutions and their payments are processed safely and securely.

As a result of a higher competition among all the financial industry, consumers now are entitled to demand greater standards of quality and higher convenience of making transactions.


New regulations should contribute to financial stability, supporting an ambitious environment and facilitate the delivery of high standard services to customers and society as a whole.

New Crypto Regulatory Framework Australia

Recently, some statements have been made regarding new guidelines in cryptocurrency by The Australian Securities and Investment Commission (ASIC) about the Initial Coin offering (ICO) mining, and trading, that is highlighted by the Australian corporations and the requirements regarding the inconveniences that occurred in the past 2017.

The new rules focus on the laws established about the signatures of the cryptocurrencies under the Australian companies law and the laws added to it. In more detail, the Securities Regulator specifies the steps required for a company focused on encryption that must be carried out with the ASIC and Australian corporation’s laws.

With respect to the established regulation, crypto will be considered as financial products, although it will be necessary to request the approval of the Australian regulators in order to acquire the necessary licenses for their implementation based on the laws.

Also, the established regulations will definitely bring another important purpose, in words of the regulator: “These regulatory requirements are in place to maintain the integrity of Australia’s financial market and ensure consumer protection.”

In this particular topic, the ASIC on the past 2018 have their focus on investors protection, the commissioner on this issue had been quite clear with those who perform the practices with keeping one foot out of the boat to understand the risks involved in the actions it may entail.

Back in 2019, the ICO and the ASIC modernized cryptocurrency trade framework do not cover the guidelines for other regulators, such as the country’s tax agency and the consumer protection group. The securities regulator says that the crypto businesses will have to make reference to the laws published by the respective agencies.

In the first published guidelines, the Australian Securities and Investment Commission said it wanted token issuers to keep their eyes open about the potential applications of the country’s Corporations Act of 2001 to ICOs. Remarking on the first ICO framework, ASIC Commissioner John Price declared:

“We want to ensure innovative firms understand the regulatory framework they may be operating under and ensure they meet any obligations they may have when raising funds in Australia.”

The statements of ASIC in this approach, encourages the producers of tokens to observe carefully and accurately if their ICO is a financial product or not. In the Austrian country, the concept of a financial product also expands to offers that involve a monetary movement.

In this way, the ICOs that contribute securities, derivatives, NCPs and managed investment schemes would be considered financial products.



Without the corresponding license granted on the basis of the new regulations, any practice considered to have an unauthorized ICO will be considered illegal in Australia, which can mean a huge gap within the terms of the law for those responsible and for those involved in it the use of them.

This will ensure a higher level of security with respect to the implementation of the currencies used in the market, and adequately protect its users.

The Malta Virtual Assets Act and Its Impacts in the Crypto Market

The crypto market is far from reaching its full potential. The Introduction of balanced and well-planned pieces of regulation could boost the growth of this new market by attracting institutional money and adding legitimization to the ecosystem.

Regulatory measures curb money laundry activities and reduce frauds and scams, therefore protect investors and safeguards market integrity.

On the other hand, increasing the complexity and the level of requirements necessary to run an Initial VFA offering may create barriers of entry for new players possibly negatively impacting the discovery and development of innovative technologies.

The Malta Virtual Assets Act:

The Malta Virtual Assets Act (VFA Act) came into force in November of 2018. The bill is part of a regulatory framework aiming to encourage the incorporation of innovative solutions in the field of blockchain technology to traditional financial services.

The regulations main objective is to provide a safety net based on three principles: investor protection, market integrity and financial stability. As well as stablishing effective preventive measures against activities related to money laundering and financing of terrorism.

The VFA Act refers to crypto assets as DLT assets and classify them according to following four different categories:

Virtual Token;

Virtual Financial Asset (VFA);

Electronic Money and;

Financial Instrument.

As the title suggests, the Act subjects the DLT assets classified as VFAs to its rules and guidelines.

A VFA can be described as ‘any form of digital medium recordation that is used as a digital medium of exchange, unit of account, or store of value’, ‘intrinsically dependent on, or utilises, Distributed Ledger Technology’. And does not fall under the definition of the three other categories of crypto assets mentioned above.

The Test:

The Malta Financial Services Authority (MFSA) formulated an assessment in order to determine whether a specific crypto asset qualifies as a VFA and therefore, should be issued traded under the provisions of VFA Act. The assessment is called the Financial Instrument Test (the Test). The VFA Act determines that ‘Issuers offering DLT assets to the public in or from Malta; and’ individuals performing any activity’ associated with DLT assets must defer to the Test.

The instrument may possibly mitigate the level of information asymmetry among the market players. The set of procedures and guidelines enclosed in the Financial Instrument Test brings transparency to the classification process. It also prevents potential misinterpretations concerning what lies within the VFA Act scope.

The regulatory scope of the of the Virtual Assets Acts encompasses the provision of services associated with Virtual Financial Assets and Initial VFA Offerings, also known as Initial Coin Offerings or ICOs.

VFA Services and Licenses:

The VFA Act determines that ‘no person shall provide, or hold itself out as providing, a VFA service in or from within Malta unless such person is in possession of a valid licence’ VFA Service Licences are of four different types, or classes. The level of requirements to have a licence granted depends on the level of complexity, risks involved, and the attributes of services intended to be rendered. The subsequent class includes the services listed on the preceding one. Thus, the Class-4 license encapsulates all the services foreseen in the Act.

Class-4 license authorises the rendering of any VFA Service, including the operation of a VFA exchange.

Class-3 license holders allowed to operate ‘deal for their own account’10and to provide the VFA services included in the Class-2 and Class-1 licenses. This license does not authorize its holder to operate a VFA exchange.

Class-2 license incorporates the services authorized for the Class-1, in addition to the following ones: ‘Execution of orders on behalf of other persons’, ‘Portfolio Management’ and ‘Custodian or Nominee Services’.

Class-1 Licence holders are ‘authorised to receive and transmit orders and/ or provide investment advice in relation to one or more virtual financial assets and/ or the placing of virtual financial assets.’12 This license does not authorise to keep or to manage client’s funds.

The introduction of a regulated licencing scheme works as defence mechanism against players associated with fraud, scam and illicit activities in general. Also, increasing or decreasing the level of requirements to hold a specific licence based on the characteristics of the services protects the market integrity and the investors.

The VFA Agent:

The VFA Act also introduces a new player into the crypto market field, the so called VFA Agent. The role of the VFA Agent is key for the engine supporting the Act.

The Act presents the VFA Agent (Agent) as 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).

The VFA Agent role is to represent and to support the VFA Service provider in its interactions with the competent authorities. When applying for a license or submitting documents for approval, the process must go through the Agent.

The issuer of a VFA and a VFA Service provider must appoint a VFA agent. Applications and submission of documents The VFA Agent safeguards compliance with the Act provisions. The Agent shall maintain a transparent relationship with the competent authority and must notify any material information addressing lack of compliance.

Agents shall maintain cohesive mechanisms capable of assessing the suitability of potential clients. And ‘shall be required to be satisfied 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.’

Adding a middle man to any of economic relation is adding to the equation a greater chance of increasing transaction costs and magnifying price equilibrium asymmetries. Both impacting the innovation development on a negative way.

Initial Virtual Financial Asset Offerings:

The Initial Virtual Financial Service Offering (VFA Offering) is fund raising method where usually the goal is to collect capital to finance a project implementation. The issuer offers a Virtual Financial Asset in exchange for funding.

The issuer must prepare a white paper in accordance with the requirements of the First Schedule, Article 2 of the Malta Virtual Financial Assets Act. The white paper is the document prepared by the issuer that gives information about the project, products or services planned to be launched.

The white paper must be submitted to the competent authority prior the launch of the VFA Offering. The submission process shall be made through the Agent.

The issuer is responsible for providing clear and accurate information to investors and other stakeholders. Over all communication channels including advertising, website, press releases and the white paper.

Increasing the costs and the complexity of running an Initial Virtual Financial Asset Offering may elitize a tool that gives a more democratic access to investment opportunities. Worth to mention the negative impact this may bring to the pace of the technological innovation process. Vitalik Buterin, the genius behind the invention of the Smart Contract, ran his first fund raising attempt at the age of 19.  The first publications Vitalik made about his ideas were in the forum known as BitcoinTalk, no white paper and no regulations to comply with.

Source: VFA Act – Malta Financial Services Authority