Issue link: https://maltatoday.uberflip.com/i/1509943
3 NEWS 19.10.2023 THE latest volume of the Malta Financial Services Au- thority (MFSA)'s publication, "The Nature and Art of Su- pervision", offers a detailed account of the Authority's progress in regulating virtual financial assets sector. The publication offers in- sights into the licensing pro- cess, including the number of authorisations issued so far, as well as the evolution of the Virtual Financial Asset Ser- vice Provider (VFASP) land- scape in Malta, showcasing the Authority's commitment to fostering a safe and com- pliant crypto ecosystem. It also details the supervisory interactions and enforcement actions carried out by the Au- thority since 2020. Cognisant of the fact that VFA is a high-risk sector, the MFSA has adopted very high expectations for new market entrants. During the authori- sation stage, persons or enti- ties wanting to offer services in this sector are subject to fitness and properness checks against specific criteria, such as reputation, competence, conflicts of interest and in- dependence of mind, as well as commitment. The stand- ards imposed by the Virtual Financial Assets Act (VFAA) have proven to be effective in acting as a filter, ensuring that only serious market play- ers with a strong compliance framework are present in Malta. Since the inception of the VFAA in November 2018 the Authority received 32 appli- cations for VFASP licence. Of these, 15 have been author- ised, 14 were withdrawn or refused and three are still in process. As at 30 June 2023, there were 11 active licensed VFASPs, with 3 of the au- thorised providers having voluntarily surrendered their licence and one provider not yet having started operat- ing. While modest, the local VFASP market is an acute representation of the global market of VFASPs with op- erators of different sizes tar- geting different market seg- ments. Between 2021 and 2022, the MFSA conducted over 140 supervisory engagements with licensed VFASPs. This encompassed inspections, su- pervisory meetings, thematic assessments, and AML/CFT examinations, demonstrating the Authority's dedication to ensuring compliance and safe- ty. In terms of enforcement and consumer protection, the MFSA issued 6 administrative measures or penalties, took 2 enforcement actions in rela- tion to unauthorised activity and issued 71 warnings be- tween 2020 and 2023. As the crypto space now transitions into the Europe- an Union's Markets in Cryp- to-Assets (MiCA) Regulation, the publication sheds light on the MFSA's plans for align- ment with MiCA, ensuring Malta remains at the forefront of crypto asset regulation. In this regard, the MFSA's Finan- cial Supervisors Academy will be hosting a MiCA Confer- ence on November 16, 2023, where industry experts and stakeholders will convene to discuss the implications and opportunities brought about by the new Regulation. "Malta's journey in the cryp- to-asset space has been both challenging and rewarding, and as we document the li- censing process for VFASPs, it is clear that the standards imposed by VFAA have been effective in ensuring the pres- ence of serious market play- ers with strong compliance frameworks." says MFSA's Head of FinTech Supervi- sion, Herman Ciappara. "This publication underscores the MFSA's commitment to transparency and regulatory excellence, providing a com- prehensive update on the regulatory journey of Malta in the field of crypto assets. As we embrace the changes brought by the MiCA Reg- ulation, our commitment to staying at the forefront of reg- ulating the crypto asset sector remains unwavering." Moreover, the publication underscores the extensive col- laboration between the MFSA and national and internation- al bodies. Locally, the MFSA has collaborated with the Fi- nancial Intelligence Analysis Unit (FIAU) and the National Coordinating Committee on Combating Money Launder- ing and Funding of Terrorism (NCC). The MFSA has also been actively involved in dis- cussions surrounding MiCA at the European level, contrib- uting its supervisory experi- ence in the crypto-asset space and also collaborated with the Sanctions Monitoring Board to assess the impacts of EU sanctions issued in response to the Russia-Ukraine conflict on the VFA landscape. The Nature and Art of Su- pervision – Volume VIII – Virtual Financial Assets can be downloaded from the MF- SA's website. This latest volume builds upon a previous publication, "The Nature and Art of Fi- nancial Supervision - Volume II - Virtual Financial Assets", which was published in De- cember 2020. MFSA publication highlights Malta's progress in the regulation of virtual financial assets sector