The Malta Financial Services Authority Publishes Industry Feedback on Security Tokens
In July 2019, the agency asked industry stakeholders what they thought and their advice concerning the definition of STOs. The MFSA asked them to assist with the interpretation of the issues facing STOs in the context of existing legal framework. According to the agency, there were no clear definitions for transferable securities.
The paper provided feedback on security token definitions and issues facing such assets within Maltese markets. The paper stated that most of respondents did not agree with categorizing different types of STOs proposed by the MFSA.
The majority of respondents said that no categorization is required in terms of whether the instrument is tokenized since transferable securities idea is unified by EU law. Categorizing them might pose structuring arbitrage risks.
It was suggested that a new framework to cater for traditional transferable securities that use distributed ledger technology should be developed.
Some respondents said Malta needs to accommodate the classification of cryptocurrency assets suggested by the Blockchain Research Institute, or that they should be categorized based on the influence of blockchain technology and the basic infrastructure of a project.
Other notions regarding the issue stated in the paper include rights and obligations management for securities, double-checking verification of transactions, alternative solutions, and more.
Despite the claims that Malta is a “blockchain island” due to its industry-friendly policies, cryptocurrency startups continue to strive to secure financial services because regulatory efforts are sluggish.
A few months ago, banks started turning away firms that lacked the “risk appetite” to support such ventures. The banks were only offering financial services to those with MFSA’s full regulation.
In recent times, it was reported that Binance lacked authorization for operations in Malta based on MFSA’s claims that it did not approve the exchange:
“Following a report in a section of the media referring to Binance as a ‘Malta-based cryptocurrency’ company, the Malta Financial Services Authority (MFSA) reiterates that Binance is not authorized by the MFSA to operate in the cryptocurrency sphere and is therefore not subject to regulatory oversight by the MFSA.”