Issue link: https://maltatoday.uberflip.com/i/1537233
MALCOLM MIFSUD Mifsud & Mifsud Advocates 8 maltatoday | SUNDAY • 6 JULY 2025 LAW & OPINION MFSA's rigorous approach to MiCA licensing Kenneth Farrugia Chief Executive Officer, Malta Financial Services Authority (MFSA) IN January 2025, the MFSA approved four firms under the Markets in Crypto Assets Regulation (the MiCA firms). Recently, the MFSA has faced unfair speculation as to whether the swiftness of its authorisa- tion process for MiCA firms has in any way compromised its thoroughness. What follows is an explanation that provides clarity and outlines the extensive ground- work undertaken by the MFSA and the Fi- nancial Intelligence Analysis Unit (FIAU) prior to the authorisation in January 2025. It demonstrates the robust approach taken to implementing the regulation. The MFSA's authorisation process was not a rapid exercise but rather the culmi- nation of extensive preparatory work. As early as November 2023, the MFSA hosted an industry event to raise awareness about MiCA preparations. Throughout 2024, the MFSA maintained an ongoing dialogue with industry participants, holding multi- ple supervisory meetings to ensure thor- ough engagement and understanding. From June to December 2024, an in- depth review of applicants' readiness for MiCA was conducted. This review was a key component of the broader '2024 the- matic exercise,' where the industry's en- gagement reflected their preparedness. The MFSA employed a comprehensive assessment toolkit, complemented by en- gagement meetings, ensuring that all Mi- CA requirements were verified by at least two officials to eliminate errors or irregu- larities. Malta established itself as an early regula- tory adopter with respect to crypto assets back in 2018 when it introduced the Virtual Financial Assets (VFA) framework, mean- ing it has seven years of supervisory expe- rience to draw on and as a result has been able to move quickly in welcoming appli- cations under MiCA. For five years leading up to their MiCA authorisation, the MFSA and FIAU maintained active supervision over the MiCA firms. This long-standing engagement involved regular interactions, enforcement actions, follow ups and reme- diation efforts, facilitating alignment with existing regulatory standards. The MFSA's historical supervision of the MiCA firms ensured each firm's evolution and readiness to implement the EU Regula- tion. This was not merely about accredited systems but involved rigorous testing and effective communication to secure a substantial level of assurance, thus demonstrating the MFSA's commitment to diligent oversight. The authorisation process incorporat- ed exhaustive due diligence and com- prehensive fitness assessments. These assessments evaluated key functionaries, govern- ance frameworks, risk man- agement protocols, ICT control frameworks, conduct procedures and compliance with AML/CFT regulations, including sanctions monitoring. Any de- viations from established norms were ad- dressed with precision, ensuring that en- forcement actions and follow-up measures were diligently enforced. This rigorous approach guaranteed a high level of assurance, facilitating the clearance required for authorisation. It un- derscores the MFSA's dedication to main- taining robust regulatory standards and safeguarding the integrity of Malta's financial services sector. While the MFSA acknowl- edges that continuous improvement is always possible, the critique suggesting undue haste in licensing lacks foun- dation. It overlooks the intricate and thorough work the authority has executed, which is vital for ensuring the confidence and stability of both the fi- nancial system and consumer in- terests. The MFSA remains steadfast in its com- mitment to comprehensive supervision, upholding transparency and excellence in all its regulatory endeavours. The careful planning and execution of authorisation procedures for MiCA demonstrate a delib- erate and informed approach that ensures Malta continues to excel as a leader in dig- ital asset regulation. Strict application of 2021 rent reform leads to eviction order THE decision of the Rent Regulation Board in Carmen Cassar et vs Joseph Caruana et (RRB 324/22 NB) concerns an application based on Article 4A of Chapter 69 of the Laws of Malta. This judgment illustrates that the Board will apply legislative thresh- olds strictly and will not dilute statutory re- quirements through discretionary leniency unless expressly allowed by law. The applicants, were the successors in ti- tle to a residential property located in Isla which had been leased since 1978 to the defendants. The original lease was agreed with the applicant's late father, under a protected rent regime at an annual rent that at the time of proceedings amounted to only €195. By invoking Article 4A, the plaintiffs re- quested a review of the rent in accordance with the statutory cap of 2% of market val- ue, or alternatively, the eviction of the ten- ants on the basis that they no longer quali- fied for protection due to their means. The Housing Authority was also notified and participated in the case as amicus curiae. Article 4A, introduced in 2021, represents a change in rent regulations. It applies to residential leases predating 1995 and seeks to ensure that the protective benefits of Chapter 69 are restricted to tenants who are genuinely in financial need. Landlords may request a review of rent or eviction where the tenant fails a means test. The test consists of two cumulative com- ponents depending on the tenant's age: An income threshold; a capital threshold. Tenants who fail either threshold are no longer entitled to indefinite tenure. The law further explains that such tenants may be granted a two-year period to vacate, during which they must pay a compensa- tory rent to the landlord as determined by the board. Exceptionally, the board has dis- cretion to raise the capital threshold where the tenant suffers from a serious disability confirmed by the Social Security Depart- ment and CRPD. The board first dealt with preliminary procedural objections. The defendants ar- gued that the applicants lacked standing as owners. This was swiftly rejected. The ap- plicants proved ownership through an af- fidavit and a causa mortis. The board was satisfied that the plaintiffs had succeeded to the property upon the death of their fa- ther and were therefore entitled to bring the action. Turning to the substantive issues, the board confirmed the applicability of Arti- cle 4A, noting that the lease was protect- ed. The key question, therefore, became whether the tenants met the means test criteria. It was not disputed that the ten- ants' income, consisting solely of retire- ment pensions and supplementary al- lowances, fell well below the threshold of €46,500. The board accordingly concluded that they passed this component. The capital assessment proved more con- tentious. The tenants declared combined assets worth €323,280. Given that the legal threshold for individuals aged between 66 and 75 years old is €245,000, the tenants exceeded the limit by roughly €78,000. The defendants advanced several defences to try and reduce the figure or justify ex- emption. Nonetheless, the board rejected all the tenants' claims by applying a strict inter- pretation of the law. The tenants argued that capital should be assessed per person, or that at least the spouse with lower assets should be tested individually. The board noted the judg- ment Nicholl Marguerite vs Darmanin, from February 2025, which confirmed that the regulations referred to joint capital of spouses. Secondly, the tenants claimed they had received a lump sum from the estate of their deceased daughter and that this should be excluded. Upon reviewing the documents, the board determined that only €60,490 could be traced and verified. Even if this were discounted, the remaining capital still exceeded the statutory thresh- old. The board emphasised that personal tragedies cannot displace legal thresholds. Thirdly, the defendants contended that the nominal value of their bond holdings was inflated and had diminished due to market instability. However, the board found no updated valuations as part of the defendant's evidence and concluded that declared values must be accepted unless credibly challenged. Finally, the tenants argued that exceed- ing the limit by a relatively small amount should not result in disqualification. The Board firmly rejected this, stating that the law permits no margin for discretion in such cases and that any excess, no matter how slight, disqualifies a tenant from pro- tection. The final argument advanced by the de- fendants was that Joseph Caruana suffered from a disability and was registered with the Commission for the Rights of Persons with Disability (CRPD). The board has dis- cretion to raise the capital threshold if the tenant's disability "is considered to be of a severe nature". Although Caruana held a CRPD disabil- ity card, the board established that he re- ceived an invalidity pension, not a severe disability allowance (SDA). Testimony by an official from the Department of Social Security clarified that only recipients of the SDA fall within the class of 'serious disabil- ities' and consequently the board declined to exercise discretion, rejecting the defend- ants' claim. Having determined that the tenants failed the means test, the board granted the defendants a two-year period to vacate the premises and ordered them to pay annual compensation of €3,320, calculated as 2% of the property's market value (€166,000). The applicants were assisted by lawyers Gianluca Cappitta and Ian Barbara.