Cryptocurrency exchange regulation in Malta

Malta might not be the biggest country in terms of size but it has certainly positioned itself as a global leader when it comes to cryptocurrency regulations, aiming to become known as the ‘blockchain island” worldwide. One of the first countries in the entire world to regulate the cryptocurrency business, it is also a top choice for cryptocurrency exchanges wanting to be regulated in 2021, even if it has been criticized in the past for some regulatory unclarity, that now seems to have been clarified, however.

The financial regulator in charge of cryptocurrency exchanges in Malta is the Malta Financial Services Authority, or MFSA, and they have said that they “actively monitor” all license holders, something quite rare in the industry. However, the extent of this “active monitoring” is said to vary. The suitable license for cryptocurrency exchanges is called a VFA Class 4 license.

Requirements for cryptocurrency exchanges aiming to be licensed in Malta

If a cryptocurrency exchange strives for regulation in Malta, the company must fulfill the following requirements:

• Be headquartered or operated in Malta. (Meaning a physical presence on the island)
• Certain capital adequacy & liquidity requirements, where amounts are dependant on the scope of operations etc.
• Appointment of a VFA Agent to serve as a point of contact between the regulator and the company for compliance matters.
• Proof of good faith.
• Proof of necessary technical resources and knowledge.
• All persons involved in the business must undertake a Fit and Proper test.
• At least 3 employees.
• Description of security procedures, how anti money laundering measures are taken, other relevant protocols etc.
• Abiding by Maltese Prevention of Money Laundering and Funding of Terrorism Regulations.
• Submitting annual external auditors’ reports to the authorities.
• Payment of application fee at the time of application (typically €24,000 for most cryptocurrency exchanges)
• Payment of annual supervisory fee.

Advantages of a Maltese cryptocurrency exchange license compared to other jurisdictions

Choosing a Maltese cryptocurrency exchange license over other available similar licenses has many advantages, some of the most important among them are:

• Malta being an EU member state.
• Prestigious license both in Europe and globally.
• Access to high level banks and payment providers.
• All documents and the entire application process can be done in English.
• Attractive Corporate Tax Regime.

How the regulatory process typically looks like if you do it through Porat Group

Porat Group is one of the leading consulting services providers for the cryptocurrency industry and has a wide network of partners and contacts with regulators, including in Malta.

If you want to apply for a license in Malta for your cryptocurrency exchange business, we always recommend having a consultation with us to begin with. This gives you the opportunity to make sure that Malta is indeed the best option for your specific cryptocurrency exchange, based on all your circumstances, plans for the future and goals, by comparing Malta as a jurisdiction for cryptocurrency exchanges with other similar options.

If that is the case, we then discuss the process itself with you, giving you timelines and total costs etc.

Porat Group then typically incorporates a local company in the country and then submits the license application to the MFSA. We then keep track of the status of the application and keep in touch with you about updates, requests etc.

The entire regulatory process typically takes up to a maximum of 6 months, and a decision is often made regarding the application within 60 days after the MFSA has received it, but this may vary depending on the circumstances in each case.

Once a company is regulated in Malta we also provide ongoing compliance and legal services as needed, and can also assist with setting up a local presence on the island, choosing payment providers and banks etc.

Contact us if you are interested in getting this process started.