The Malta Financial Services Authority ("MFSA") has launched a consultation process on a proposed regulatory framework for collective investment schemes investing in virtual currencies. This is part of the Maltese Government's roadmap to implement its 'National Blockchain Strategy' that will see Malta embracing blockchain innovation.
While the proposed rulebook applies to collective investment schemes licensed as Professional Investor Funds (" PIFs") which invest in virtual currencies ("VCs") as their investment objective, the MFSA is presently considering whether Alternative Investment Funds and Notified Alternative Investment Funds should also be allowed to invest in virtual currencies.
The main proposals introduced within this new rulebook aim at safeguarding the interest of investors and the integrity of the financial market in the context of VCs. To this end, the rulebook imposes specific requirements on the governing bodies of collective investment schemes and in certain instances, the collective investment schemes' service providers, in relation to the following
Corporate vehicle
For the time being, the legal structures for PIFs making such investments should be limited to SICAV and INVCO structures, which are required to have a board of directors responsible for the overall conduct of business of the PIF.
Competence
The directors and service provider of the fund would be required to have sufficient knowledge and experience in the field of information technology, VCs and their underlying technologies, including but not limited to the distributed ledger technology.
Risk Warnings
The OIF would be required to include risk warnings in relation to its proposed direct and/or indirect investment in VCs within its offering documentation.
Quality Assessment
The appointed investment manager would be required to carry out appropriate research in order to assess the "quality" of the VCs being invested into.
Risk Management
Prior to making any investments, the appointed investment manager would be required to assess whether the risk profile of the said VCs falls within the scope of the risk management policy of the PIF.
Valuation
The PIF would be required to ensure that the appointed service providers have the business organisation, systems, experience and expertise necessary to conduct the required verification and valuation of the its investments in VCs.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.