MFSA Paper on ICOs & Cryptocurrencies

The Malta Financial Services Authority has published a discussion paper on Initial Coin Offerings (ICOs), Virtual Currencies and related Service Providers in order to gain feedback from industry insiders prior to the drafting of a legal framework which would regulate these new technologies. This is in line with the MFSA’s aim of supporting innovation in the financial services sector whilst ensuring paramount protection of the interests of the investor as well as overall financial stability.

ICOs – also referred to as token sales or ‘crowdsales’ – are a less traditional method of raising finance without going through the regular channels like bank loans or investors. This route is often used by start-ups that run on distributed ledger technology (DLT). In 2014, the Ethereum blockchain, for example, pre-sold 7.4 million ETH in just twelve hours. In November 2017 alone, ICOs have raised over $743M.

The Maltese Prime Minister has also expressed a proposal for Europe to be seen as the bitcoin continent. He acknowledged that the rise of cryptocurrencies could be slowed but not stopped. Rather than resist therefore, European regulators should innovate and create mechanisms in which to regulate cryptocurrencies, to harness their potential and better protect consumers, while making Europe the natural home for innovators. This was also followed by the proposal of a sandbox test to explore the introduction of a cryptocurrency in a controlled framework, thereby enabling regulators to test possible controls and legislation for the technology.

This consultation will allow for the drafting of a regulatory document, which would then be adopted by the MFSA, in a field that is, as yet, highly unregulated. The regulation of ICOs, cryptocurrencies and service providers involved in such activities could go a long way in protecting investors and encouraging innovation in this sector.

Industry participants and interested parties are encouraged to send their feedback to the MFSA by no later than the 11th January 2018.

For more information on ICOs, Cryptocurrencies, Bitcoin, Blockchain, Smart Contracts and related areas please contact Dr Ian Gauci on