EU Nation Of Malta Is Moving Closer To Define When ICOs Are Securities

Malta is among the list of the newest countries that are moving closer to introducing a test that would define when the assets derived from ICOs can have the status of securities.

The announcement comes from a consultation paper that has been published last Friday – and one that is currently seeking public feedback. In it, the Malta Services Authority (FSA) set out a proposal for what’s known a Financial Instrument Test which would become part of their proposed Virtual Financial Asset Act (VFAA).

Malta’s agency running this test also announced that the methodology of the test is designed based on the feedback from the previous discussion paper which was released in November 2017. This discussion paper introduced the concept to the public.

In the latest paper, the test comprises of a process in three stages. The first, second and third stage would together verify whether the distributed ledger technology (DLT) asset falls under the category known as “virtual tokens”.

The following is an excerpt taken from the paper:

“Virtual token is a DLT asset which has no utility, value or application outside of the DLT platform on which it was issued and that cannot be exchanged for funds on such platform or with the issuer of such DLT asset.”

The assets that can be traded in a secondary market would then pass to the second phase of the test which will outline the various securities decisions set by European financial regulators – which will then be applied.

Lastly, the third stage of the test would see the ICO tokens regulated under the proposed VFAA. According to the FSA, this process would embrace a hybrid framework that adopts both EU regulations and national ones.

The paper is also open for public input until May 5, according to the agency. The developing regulatory framework is all part of Malta’s effort to embrace blockchain innovation with a legal environment and eventually attract more and more blockchain businesses to the country.