Over the last 18 months, the small Mediterranean island of Malta has cemented itself as a leading jurisdiction for blockchain and crypto companies. Following the enactment of three laws to regulate the fledgling sector, it has earned itself the name “The Blockchain Island”.
Many other countries have considered virtual financial assets as risky or “hot potatoes”, but instead Malta has sought to regulate and secure them through its comprehensive licensing system.
Whilst there are a total of four different Virtual Financial Asset Licenses, these licenses cover a total of eight VFA services. These are the following: reception and transmission of orders, execution of orders on behalf of a third party, dealing on own account, portfolio management, custodian or nominee services, investment advice, placing of VFAs, or operation of a VFA exchange.
Each of the four licenses we will discuss, encapsulate the eight VFA services mentioned above.
Class 1 License
Anyone holding a Class 1 License will be authorised to conduct the services of receiving and transmitting orders, providing investment advice, and placing of VFAs. In order to hold this license the licensee will need to either hold an initial capital requirement of EUR 50,000 or EUR 25,000 and Professional Indemnity Insurance. These services will be licensed and supervised by the Malta Financial Services Authority and as such the license holder will be required to pay a yearly fee of EUR 5,500 for revenue not exceeding EUR 50,000 and an additional EUR 700 for each EUR 50,000 tranche after.
Class 2 License
Anyone in possession of a Class 2 License is able to provide any of the eight VFA services with the exception of operating an exchange or dealing on own account. Services covered are the reception and transmission of orders, execution of orders on behalf of a third party, portfolio management, custodian or nominee services, investment advice, or placing of VFAs. Due to being able to provide many more services with this kind of license, it make sense that the initial capital requirement is higher than Class 1. A Class 2 License has an initial capital requirement of EUR 125,000 with a supervisory feel of EUR 9,000 per year on revenue not exceeding EUR 250,000 plus EUR 800 per EUR 250,000 thereafter.
Class 3 License
For those looking to operate seven out of the eight services, with the exception of operating a VFA exchange, a Class 3 License is required, This category of license obliges holders to put up EUR 730,000 in initial capital and the supervisory fee is EUR 12,000 up to EUR 250,000 plus EUR 800 for every subsequent EUR 250,000.
Class 4 License
The last kind of license available is a Class 4 License which allows the holder to conduct all eight of the VFA services as defined by the MDIA. The initial financial layout for this license is hefty and is set at EUR 730,000 with a supervisory fee of EUR 50,000 per year on revenue up to EUR 1,000,000. For every additional EUR 1,000,000 per year thereafter, an additional fee of EUR 5000 per year is payable to the MFSA.
Whilst some of the fees may seem a little steep to some, you need to consider the reputation that Malta has as a jurisdiction of excellence. These are the world’s first crypto regulations and can be seen as a certification of quality and compliance to put your customers minds at rest. Paying a bit extra for Malta VFA licensing can serve you well in the long run when it comes to competing with others that may be regulated in a less-reputable jurisdiction, or who may not be regulated at all.
To find out more about acquiring licenses to operate in crypto and blockchain spheres across a number of jurisdictions (not just Malta) contact Fast Offshore today. With over 21 years of corporate services experience, we can assist you with an array of services spanning Europe, America, and Latin America.