The Malta Gaming Authority (‘MGA’) issued a communication regarding the amendments to the Virtual Financial Assets (VFA) Sandbox, specifically to the Guidance on the use of Innovative Technology Arrangements and the acceptance of Virtual Financial Assets and Virtual Tokens through the implementation of a Sandbox Environment (‘Guidance’).
The Guidance was launched a few months following the promulgation of the VFA legal framework, with a view to enable the use of virtual assets and distributed ledger technologies (‘DLT’) by gaming operators. The VFA Sandbox was initially divided into two phases and is currently in its second phase running until the end of December 2021.
Aspiring VFA Sandbox participants must be licensed by the MGA and possibly even by the Malta Financial Services Authority (‘MFSA’) as further set out below.
Licensed Service Providers
The Guidance has been amended to clarify that gaming operators rendering a licensable VFA activity within the parameters of the VFA Sandbox must acquire a license by the MFSA before being able to render such services. In cases where the gaming operator does not acquire an MFSA licence and instead outsources the VFA related services, the third-party service provider must be in possession of a VFA Licence from the MFSA.
VFA Legal Opinion
Gaming operators intending to operate within the parameters of the VFA Sandbox must acquire and subsequently register a legal opinion from a VFA Agent regarding the licensibility of the services to be rendered in terms of the VFA Act and effectively whether such services fall within the parameters of the VFA Act.
The gaming operator must also conduct a Financial Instrument Test on any DLT assets used within the VFA Sandbox.
Gaming operators participating in the VFA Sandbox must have in place control verifications for the purpose of being able to verify ownership of a player’s wallet and that effectively the used wallet does belong to the registered player. Such verifications must be carried out in line with anti-money laundering laws.
The Guidance provides that verification of ownership may be carried out by requiring the player to deposit a minimum amount of a €1.00 in the equivalent value a VFA, following which if the wallet is deemed verified the amount is reimbursed. Where possible the player should also be required to cryptographically sign the wallet with his private key.
The Guidance clarifies that innovative technology arrangements (‘ITAs’) shall be audited by systems auditors registered with the Malta Digital Innovation Authority, following which a report is to be produced with the systems auditor’s opinion.
The use of an ITA shall only be accepted by the MGA if the audit report has a positive opinion and the MGA is satisfied that the regulatory requirements shall be adhered to by the operator.
Update written by Dr Bernice Saliba.
This article is not intended to impart legal advice and readers are asked to seek verification of statements made, from an advocate or law firm, before acting on them.