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13 maltatoday | SUNDAY • 19 NOVEMBER 2023 NEWS Moneybase payment services are brought to you by Moneybase Ltd C87193, which is licensed by the MFSA to transact the business of a Financial Institution in terms of the Financial Institutions Act, Cap 376. All investment services are brought to you by Calamatta Cuschieri Investment Services Ltd C13729 which is licensed by the MFSA to undertake investment services business under the Investment Services Act, Cap 370. Let's talk business. Supercharged global payments from a trusted local business account. Open an account within 48 hours Get started on moneybase.com Part of the Calamatta Cuschieri Group gime governing ICOs, crypto- currency exchanges, and wallet providers. But the regime failed to attract many crypto companies. "We started with 180 partici- pants when we didn't have the li- censing regime in place. When we introduced licensing, there were around 30 who showed interest, and now we only have 11 compa- nies authorised in Malta," Farru- gia said. Farrugia said Malta's financial regulators have learned a lot from the whole process, and the focus in now shifting to attract quality rather than quantity. "We're not about attracting and having 100 or 200 operators in Malta. We want to attract the big companies who are ensuring quality delivery of the services and controls. That's the main objec- tive," he said. Farrugia emphasised that the effectiveness of the MiCA regime will ultimately boil down to how effective it is on the ground, and how supervisory authorities con- duct their interventions. "In the case of Malta, the MFSA and other participants like the FI- AU, we've been testing this model for the past three to four years. We have been reviewed by the FATF, IMF, Moneyval, and so on, partial- ly on the crypto side of things. We implemented a number of recom- mendations," he said. "We also took on other rec- ommendations on the financial sector that were given to us by supranational authorities. These were embedded into the VFA framework. So even our people are now well-versed to implement the obligations into practice and into supervisory interventions," he continued. The MFSA and FIAU has also taken enforcement action on a number of VFA agents, and assets have been frozen on a particular exchange. Farrugia said this shows the progress made on crypto en- forcement. "In our case, I think we can use that competitive advantage to our own benefit, not to reduce the re- quirements or the effectiveness, but to continue to improve and be more effective on the ground." There are still risks in crypto in- vestments, including cyber securi- ty, fraud and the safeguarding of clients. "We need to continue to invest our efforts to improve, be- cause we're not perfect." What's next for crypto? It has been a turbulent year for the crypto scene. Indeed, it was this time last year that the crypto- currency exchange FTX filed for bankruptcy after its rival Binance – the world's largest crypto ex- change and once the poster boy of Malta's crypto dream – pulled out of a deal to acquire the company. FTX was the third-largest ex- change at the time of its collapse. But an article by CoinDesk on 2 November revealed that an affil- iated trading firm, owned by the FTX chief executive Sam Bank- man-Fried, held a significant amount of FTX's exchange token. This sparked a spike in withdraw- als, and on 11 November, the company filed for bankruptcy. This led to a crisis of confidence, and crypto prices have only par- tially recovered from the shock. But Farrugia thinks the sector will recover, especially with jurisdic- tions and blocs like the European Union and the US starting to reg- ulate crypto. "I think it will recover, and it is the way forward. Apart from that, crypto is also now amalgamating into other financial products, like FIs for processing purposes," he said. Farrugia added that infrastruc- ture is key to supporting the sec- tor. It needs human resources with the technical know-how. "You cannot have an employee going through the transactions. You need technical resources and systems to evaluate and identify trends and typologies so we can take action." He said a crucial factor to this MiCA regulation is cooperation with other authorities in the EU and beyond, especially with the number of cross-border transac- tions taking place. The MiCA regulation was ap- proved in May 2023 but will come into force in December 2024. There will be a transitional period depending on the member state which could extend until June 2026. In Malta, the MFSA carried out a public consultation on the planned changes to the VFA framework. According to the consultation document, several requirements will be reduced in line with the MiCA regulation, and others will be added in. The new rulebook will come into effect once published, but there will be a three-month tran- sitionary period for new require- ments pertaining to the orderly wind-down plan, service-specific requirements, supplementary conditions and the whitepaper disclosure requirements.