Malta is re-shaping the meaning of an Initial Coin Offering. Passed 3 new laws for the regulation of Blockchain Industry. Most significant is a full registration system for Initial Coin Offerings (ICOs) so-called Virtual Financial Asset (VFA) Act. Offer to the public of tokens or trading of tokens on exchange in or from Malta requires the Issuer to be licensed. To get the licence in Malta you must be prepared for the implications of being licensed. First your ICO will need to fall within the category of 'Virtual Financial Asset'. If applicable then the Act will apply. 

This is defined as NOT:

1) financial instrument [EU definition]

2) electronic money [EU definition]

3) virtual token. This is a definition of what appears to be a 'closed loop' value asset which is not tradable (however the detail of this definition has yet to be described).

If your asset is NOT one of the three categories then it is a Virtual Financial Asset.

Therefore before you offer the asset from Malta the white paper needs to be approved.

Before you decide to dive right in you will need a lawyer and a local agent to support you in the process. They will represent you with the Maltese authorities. 

Note that VFA changes the landscape of ICOs. Now Issuers will be responsible for market manipulation, insider trading and have fiduciary obligations to their token holders.

It is the 'Gold Standard' for ICOs in the world now.

Below is a summary of legislation and an extract about white paper requirements. 

 Summary below of Legislation

Part II Initial VFA Offerings – This section provides the Act’s requirement for the registration of virtual financial assets to trading on a DLT exchange. These requirements include the registration of a whitepaper which satisfies the Act’s provisions for a whitepaper; a website that is in compliance with rules to be set by a competent authority; advertisement of the offering to be consistent with the provision of the Act; Appointment of an independent Virtual Financial Asset Agent as outlined by the Act (Article 7);  principles which the issuer has to abide with; civil liabilities of the issuer for misstatements in whitepaper, advertisement and website; and the powers of the competent authority.

Part III Licensing Requirements – This section outlines the licensing and determination of application requirements including the powers of the competent authority in determining the nature of the token (if it is a virtual financial asset, a financial instrument, or a virtual token) and if the token is issued and or made in or from within Malta.

Part IV Application, Grant, Cancellation, etc., of Licences – This section outlines who is allowed to make the application (VFA Agent only); the VFA Agent qualifications, applicable restrictions and their supervision; factors determining issuance and or refusal of license; designation of license as a revocable privilege which cannot be transferred without prior consent of the competent authority and the authority’s powers in granting refusing, varying, cancelling or suspending a licence.

Part V Board of Administration and Obligations of Licence Holders – This section outlines the requirement of compliance with the Prevention of Money Laundering Act (AML Act) including compliance with prudential requirements as defined; the qualities, governing principles and responsibilities (including fiduciary obligation toward its customers) of the issuers Board of Administration; consent requirements for participation in a license holder, mergers, reconstructions, divisions and changes in capital or voting rights, and disposal of business.

Part VI Prevention of Market Abuse – This section outlines the jurisdiction scope of prohibition of market abuse; details on various types of market abuse including insider trading, unlawful disclosure of inside information, market manipulation; the placement of systems, procedures and arrangements to monitor and detect abuse in the VFA Exchange which administer trading admission; to suspend and or discontinue VFA on VFA Exchange; the power of the competent authority to introduce test for issuers, VFA Agents and .  

Part VII Regulatory and Investigatory Powers – This section outlines the various powers of the responsible Minister; the powers of the competent authority which includes powers to require information, appoint inspector where required, issue directives, protect the interest of the public, right of entry, impose an Administrative Penalty of not more than €150,000 for each infringement of the provisions of the Act or rules established thereunder;

Part VIII Duty of Auditors – This briefly sketch the duties of auditor appointed by the licence holder to report immediately fact or decision that may constitute material breach of applicable regulations; report annually to the competent authority on the licence holder’s systems and security access protocols; waiver of the duty of professional secrecy in relation to their reporting obligation.

Part IX Appeals, Remedies, Sanctions and Confidentiality – This section provides right to an appeal to a Tribunal against directive, notices, decisions administrative penalties made under the Act as provided under article 21 of the Malta Financial Services Authority; it also defines the powers of the court in relations to applications made by competent authority, definition of offences and penalties under the Act.

Part X Miscellaneous Provisions – This section briefly outlines applicable exclusion of liability of the competent authority; validity of notices; requirement of operating in other European Member States (EEA); cooperation of the competent authority with ESAs and other regulatory agencies.

Part XI Transitory Provisions – Provide 6 months to those issuing VFA to prepare and register a whitepaper; one month to VFA to register; 12 months for those seeking to provide VFA services.


Matters to be specified in a whitepaper of an issuer and requirements for its approval and publication
General principles
1. The whitepaper shall contain the information which, according to the particular nature of the issuer and of the virtual financial assets offered to the public, is necessary to enable investors to make an informed assessment of the prospects of the issuer, the proposed project and of the features of the virtual financial asset. This information shall be presented in an easily analysable and comprehensible form.
2. Certain information specified in this Schedule may be omitted from the whitepaper if:
(a) disclosure of such information would be contrary to the public interest;
(b) disclosure of such information would be seriously detrimental to the issuer, provided that the omission would not be likely to mislead the public with regard to facts and circumstances essential for an informed assessment of the prospects of the issuer, the proposed project and of the features of the virtual financial assets to which the whitepaper relates;
(c) such information is of minor importance only for a specific offer and is not information that will influence an informed assessment of the prospects of the issuer, the proposed project and of the features of the virtual financial assets to which the whitepaper relates; or
(d) disclosure of such information is found to be inappropriate to the issuer’s sphere of activity or proposed activity, as the case may be, or its legal form or to the virtual financial assets being offered, in which case the whitepaper shall contain equivalent information when available.
3. The whitepaper shall be drafted in the English language and any or no additional languages, at the issuer’s discretion.
4. (1) The whitepaper shall include a summary. The summary shall, in brief and non-technical language, provide key information in relation to the offering. The format and content of the summary of the whitepaper shall provide, in conjunction with the whitepaper, appropriate information about essential elements of the virtual financial assets concerned in order to aid investors when considering whether to invest in such virtual financial assets. The summary shall be drawn up in a common format in order to facilitate comparability of the summaries of similar virtual financial assets and its content should convey the key information of the virtual financial assets concerned in order to aid investors when considering whether to invest in such virtual financial assets. The summary shall also include a warning that:
(a) it should be read as an introduction to the whitepaper;
(b) any decision to invest in the virtual financial assets should be
based on consideration of the whitepaper as a whole by the investor;
(c) the offering of virtual financial assets does not constitute an offer or solicitation to sell financial instruments and that any such offer or solicitation of financial instruments will be made only by means of a prospectus or other offering documentation in terms of any applicable Maltese law;
(d) without prejudice to article 10 of this Act, civil liability attaches to those persons who have tabled the summary including any translation thereof, and applied for its notification.
(2) For the purposes of this paragraph "key information" means essential and appropriately structured information which is to be provided to investors with a view to enabling them to understand the nature and the risks of the proposed project, the issuer and the virtual financial assets that are being offered to them.
Specific matters to be included
5. Paragraphs 6 to 13 of this Schedule contain the specific matters to be included in a whitepaper.
The persons responsible for the whitepaper
6. Names, functions and declarations by the persons responsible for the whitepaper that to the best of their knowledge the information contained in the whitepaper is in accordance with the facts and that the whitepaper makes no omission likely to affect its import.
The offer to the public
7. At least, and to the extent it is applicable, the following information on the offer shall be provided in the whitepaper:
(a) description of the reason behind the initial virtual financial asset offering;
(b) detailed technical description of the protocol, platform and, or application, as the case may be, and the associated benefits;
(c) detailed description of the sustainability and scalability of the proposed project;
(d) associated challenges and risks as well as mitigating measures thereof;
(e) detailed description of the characteristics and functionality of the virtual financial assets being offered;
(f) detailed description of the issuer, VFA agent, development team, advisors and any other service providers that may be deployed for the realisation of the project;
(g) detailed description of the issuer’s wallet/s used;
(h) description of the security safeguards against cyber threats to the
underlying protocol, to any off-chain activities and to any wallets used by the issuer;
(i) detailed description of the life cycle of the initial virtual financial asset offering and the proposed project;
(j) detailed description of the past and future milestones and project financing;
(k) detailed description of the targeted investor base;
(l) exchange rate of the virtual financial assets;
(m) description of the underlying protocol’s interoperability with other protocols;
(n) description of the manner funds raised through the initial virtual financial asset offering will be allocated;
(o) the amount and purpose of the issue;
(p) the total number of virtual financial assets to be issued and their
(q) the distribution of virtual financial assets;
(r) the consensus algorithm, where applicable;
(s) incentive mechanism to secure any transactions, transaction and/
or any other applicable fees;
(t) in the case of a new protocol, the estimated speed of transactions;
(u) any applicable taxes;
(v) any set soft cap and hard cap for the offering;
(w) the period during which the offer is open;
(x) any person underwriting or guaranteeing the offer;
(y) any restrictions on the free transferability of the virtual financial
assets being offered and the DLT exchange/s on which they may be traded, to the extent known by the issuer;
(z) methods of payment;
(aa) specific notice that investors participating in the initial virtual
financial asset offering will be able to get their contribution back if the soft cap is not reached at the end of the offering and detailed description of the refund mechanism, including the expected time-line of when such refund will be completed;
(ab) detailed description of the risks associated with the virtual financial assets and the investment therein;
(ac) the procedure for the exercise of any right of pre-emption;
(ad) detailed description of the smart contract/s, if any, deployed including inter alia the adopted standards, its/their underlying protocol/s, functionality/-ies and associated operational costs;
(ae) if any smart contract/s is/are deployed by the issuer, details of the auditor who performed an audit on it/them;
(af) description of any restrictions embedded in the smart contract/s deployed, if any, including inter alia any investment and/or geographical restrictions;
(ag) the program agents used to obtain data and verify occurrences from smart contracts (also known as ‘oracles’) used and detailed description of their characteristics and functionality thereof;
(ah) bonuses applicable to early investors including inter alia discounted purchase price for virtual financial assets;
(ai) the period during which voluntary withdrawals are permitted by the smart contract, if any;
(aj) description of the issuer’s adopted white-listing and anti-money laundering and counter financing of terrorism procedures in terms of the Prevention of Money Laundering Act and any regulations made and rules issued thereunder;
(ak) intellectual property rights associated with the offering and protection thereof; and
(al) the methods of and time-limits for delivery of the virtual financial assets:
Provided that the competent authority shall have the power to waive or modify any of the above requirements within the context of a particular initial VFA offering or a particular application for admission to trading on a DLT exchange, as the case may be.
Details of the issuer
8. The following details of the issuer:
- Name;
- Registered address and registration number;
- Date of registration;
- The issuer’s object(s);
- Where applicable, the group of undertakings to which the issuer belongs;
- Insofar as they are known, indication of the members who directly or indirectly exercise or could exercise a determining role in the issuer’s administration.
The issuer’s principal activities
9. Description of the issuer’s principal activities including the disclosure of any legal proceedings having an important effect on the issuer’s financial position.
The issuer’s board of administration
10. Names, addresses and functions of administrators. Benefits for third parties and other expenditure
11. The amount or estimated amount of preliminary expenses and the persons by whom any of those expenses have been paid or are payable, and the amount or estimated amount of the expenses of the issue and the persons by whom any of those expenses have been paid or are payable.
12. Any amount or benefit intended to be paid or given to the VFA agent or any person endorsing the offering, and the consideration for the payment or the giving of the benefit.
Issuer’s financial track record
13. Where the issuer has been established for a period exceeding three years, details of its financial track record.
Validity of a Whitepaper, Arrangements for Approval and Publication of a Whitepaper
14. A whitepaper shall be valid for 6 months after its approval by the competent authority for offers to the public.
15. (1) The competent authority shall not register a whitepaper unless it is satisfied that the whitepaper has been drawn up in accordance with the provisions of this Act, this Schedule and any regulations, Rules or guidance made or issued thereunder.
(2) The competent authority shall notify the issuer or the VFA agent, as the case may be, of its decision regarding the approval or otherwise of the whitepaper.
Significant new factors, material mistakes or inaccuracies
16. (1) Every significant new factor, material mistake or inaccuracy relating to the information included in the whitepaper which is capable of affecting the assessment of the virtual financial assets and which arises or is noted between the time when the whitepaper is approved and the final closing of the offer to the public, whichever occurs later, shall be mentioned in a supplement appended to the whitepaper. Such a supplement shall be approved in the same way and published in accordance with at least the same arrangements as were applied when the original whitepaper was published. The summary, and any translations thereof, shall also be supplemented, if necessary, to take into account the new information included in the supplement.
(2) Investors who have already agreed to purchase or subscribe for the virtual financial assets before the supplement is published shall have the right to withdraw their acceptance within two working days after the publication of the supplement, provided that the new factor, mistake or inaccuracy referred to in paragraph (1) arose before the final closing of the offer to the public and the delivery of the virtual financial assets. That period may be extended by the issuer in which case the smart contract, if any, shall be updated accordingly. The final date of the right of withdrawal shall be stated in the supplement.