Fintech Insights #8 –
Furthering MiCAR in Malta by Chapter 647

Chapter 647 of the Laws of Malta, titled the Markets In Crypto-Assets Act (hereinafter referred to as “Chapter 647”), integrates all aspects of Regulation (EU) 2023/1114 of the European Parliament and Council on markets in crypto-assets (“MiCAR”). MiCAR regulates the issuers of asset-referenced tokens (“ARTs”), electronic money tokens (“EMTs”), other types of tokens, as well as the conduct of crypto asset service providers (“CASPs”).

Malta’s presidential assent to Chapter 647 was given on the 5^th of November 2024 through  Act No. XXXVI of 2024 (“Act 36 (2024)”); and it was promulgated on the same day. Similar to MiCAR, Act 36 (2024) regulates both issuers and CASPs.

In addition to Act 36 (2024), the following two Maltese Legal Notices were also published on the 5^th of November 2024:

• Markets in Crypto-Assets Act (Fees) Regulations 2024, Legal Notice 295 of 2024 of the Laws of Malta (“LN 295 (2024)”) which provides the supervisory fees paid to the Malta Financial Services Authority (“MFSA”) including both application-stage fees and ongoing supervisory fees under Chapter 647; and

• Virtual Financial Assets (Amendment No. 2) Regulations 2024, Legal Notice 296 of 2024 of the Laws of Malta (“LN 296 (2024)”) under the Virtual Financial Assets Act, Chapter 590 of the Laws of Malta (“VFA Act”). LN 296 (2024) provides for the gradual repeal of the VFA Act’s only set of subsidiary legislation as well as the fees due to the MFSA under the VFA Act. The latter were included in LN 295 (2024) under Chapter 674.

Gradual repeal of Malta’s VFA Act

Article 64 of Act 36 (2024) says: “The principal [VFA] Act shall be repealed on 3 July 2026 without prejudice to anything done or omitted to be done thereunder”. The amendments done in the VFA Act relating to tokens by Act XIV of 2024 have been largely replicated in Chapter 647 through Act 36 (2024).

Consequently, the gradual repeal of the VFA Act (i.e. Chapter 590 of the Laws of Malta) will not have a major impact on the local industry as it is merely a legislative consolidation exercise of synchronising directly-applicable EU law with a corresponding local legislative act which uses the latter’s structure and terminologies.

In the previous fintech insight it was observed that Titles III and IV of MiCAR (applicable from June 2024) which were integrated in Maltese law by Act XIV of 2024 of the Laws of Malta (dated the 16^th of April 2024) did not necessitate significant changes to the VFA Act since both regimes treat digital assets similarly to how MiFID regulates financial products.  In fact, the most noticeable change in Act XIV of 2024 was the removal of multiple references to the VFA Agent from the VFA Act, which was required under the Maltese  VFA regime but not by the EU’s MiCAR.

Although the VFA regime will be repealed in 20 months’ time on 3^rd July 2026, no new applications are allowed under the VFA regime. New applications are required to be done under MiCAR as integrated in Chapter 647.

Nevertheless, Article 63 of Act 36 (2024) adds a transitory provision to the VFA Act through the addition of a new article, namely Article 66, which says: “Persons who, on 30 December 2024, are licensed under this [VFA] Act to provide, or hold themselves out as providing, one or more VFA services may continue to provide, or hold themselves out as providing, those services in accordance with the applicable provisions of the said Act and any regulations made, and rules issued thereunder, until 1 July 2026 or until they are granted or refused an authorisation pursuant to Article 63 of the MiCA Regulation, whichever comes first.”

Minor amendments to the Banking Act

MiCAR provides EU-licensed credit institutions with a number of exemptions to provide crypto services and/or issue EMTs and ARTs in the EU provided that they follow the applicable exemption notification processes outlined in MiCAR. Act 36 (2024) provides some minor amendments to banking laws in Malta to cater for these MiCAR exemptions for credit institutions.

Entities licensed by the Banking Act, Chapter 371 of the Laws of Malta (the “Banking Act”) would be allowed to issue EMTs and ARTs provided they follow the exemptions for credit institutions in Titles III and IV of MiCAR which entail a notification process to the MFSA which is simpler than a fully-fledged application.

Credit institutions would also be allowed to offer crypto services provided that they follow the exemption process mandated by Articles 59 and 60 of MiCAR for CASPs.

These exemptions for credit institutions have been integrated into Maltese law as per the following amendments which were promulgated by Act 36 (2024):

• Article 60 of Act 36 (2024) adds a definition of MiCAR in the Banking Act.
• Article 61(a) of Act 36 (2024) provides that Item 13 of Schedule 1 of the Banking Act (which includes the additional activities that banks can be licensed to carry out) will be changed from: “ Issuing electronic money” to “13. Issuing electronic money including electronic money tokens as defined in point (7) of Article 3(1) of the MiCA Regulation”.
• Article 61(b) of Act 36 (2024) provides that the same Schedule 1 of the Banking Act should have two additional items after item 13, namely, “ Issuing of asset-referenced tokens as defined in point (6) of Article 3(1) of the MiCA Regulation; 15. Crypto-asset services as defined in point (16)of Article 3 of the MiCA Regulation”.

The addition of “Crypto-asset services as defined in point (16) of Article 3 of the MiCA Regulation” in the Banking Act includes all the CASPs services which a licensed CASP would be allowed to offer under MiCAR.

CONSIDERATIONS FOR CHOOSING MALTA AS A MiCAR BASE

 Although MiCAR applies directly to all EU Member States equally, there are numerous factors which make Malta an attractive State (especially for non-EU applicants) to apply and maintain their MiCAR licence for issuing a token and/or offering crypto-related services across the whole European Union. The following are some of the factors:

1 – Crypto-experienced regulator

Malta has been a forerunner in regulating digital assets with the introduction of the VFA Act back in 2018 which contained provisions that regulate digital assets in a very similar manner to the EU’s MiCAR. This is because both regimes treated crypto assets on MIFID principles and had similar obligations for issuers, CASPs, market abuse and custody. Accordingly, the MFSA, as the Maltese regulator and the designated national competent authority under MiCAR, did not require significant amendments to its fintech rulebook to align with the provisions of MiCAR. Owing to the alignment between MiCAR and the VFA Act, the Maltese regulator has proactively engaged in prudential supervision through a regime closely mirroring MiCAR for several years, positioning itself ahead of crypto regulators in other EU Member States.

2 – Proportionate approach to outsourcing

As an EU Member State, Malta fully practises the EU’s principle of administrative proportionality. The MFSA is aware of Malta’s insularity as an island as well as being the smallest jurisdiction in the EU. Proportionality demands that smaller jurisdictions require more flexibility in implementing regulatory requirements in line with their specific economic and operational context. Under MiCAR, outsourcing arrangements are permitted, provided that certain core functions are maintained within the jurisdiction which issued the licence. Malta’s regulatory framework allows CASPs and issuers to outsource non-core functions, while critical functions that ensure regulatory oversight remain on the island. This proportionate approach means that Malta, recognising the practical constraints of a smaller economy, permits CASPs and issuers to achieve operational efficiencies through outsourcing, provided that essential compliance, risk management, and control functions are performed domestically and any non-EU servers/clouds are replicated locally.  This flexibility allows MiCAR applicants to optimise costs and access both EU and non-EU expertise while fulfilling MiCAR’s oversight and operational continuity requirements.

3 – Companies and trusts based on English law

MiCAR requires all applicants to be a legal person. Setting up a company in Malta is a straightforward process with a specialised registry solely for companies, trusts, partnerships and other legal persons. Maltese Company Law is based on English Common Law. Moreover, Malta also recognises and regulates trusts whose law is also based on English Common Law. More information on setting up a company or a trust in Malta can be found here.

4 – Immigration programmes supporting international talent

 Malta’s immigration programmes provide structured pathways for non-EU nationals, supporting the relocation of founders, executives, and skilled professionals essential for crypto operations. Initiatives such as the Malta Global Residence Programme, the Malta Startup  Residency Programme, the Key Employment Initiative, and the Malta Permanent Residence Programme grant employers access to talent from non-EU regions, including the Middle East, China, USA, South Africa and Latin America. Malta’s immigration flexibility is particularly advantageous for CASPs and crypto issuers seeking to attract international expertise, thereby ensuring that they can establish and sustain MiCAR-compliant operations with the requisite human resources.

5 – Established payments and EMIs infrastructure

One of the requirements of any crypto operation is the access to fiat-related services and payments infrastructure. Due to Malta’s long-standing reputation as a digital-entertainment centre, Malta’s financial services infrastructure is well-developed in the fields of payments-services-providers (“PSPs”) and electronic money institutions (“EMIs”).  This infrastructure provides CASPs and crypto issuers with access to traditional finance (“TradFi”) channels necessary to operate efficiently and meet MiCAR’s requirements for operational resilience and fund flows. PSPs in Malta are regulated by the Financial Institutions Act (Chapter 376 of the Laws of Malta) which transposes the EU’s Payment Services Directive (PSD2). Malta’s pro-paytech environment benefits MiCAR applicants by facilitating integration with established banking and payment providers, which mitigates challenges around fund movement and client asset security.  For more information on PSPs in Malta please click here.

Although MiCAR’s regulatory framework applies across the EU, Malta’s regulatory expertise, established payment infrastructure, flexible immigration pathways, and proportionate outsourcing policies distinguish it as an optimal jurisdiction for MiCAR applicants. By basing operations in Malta, crypto exchanges, crypto custodians and crypto issuers benefit from a structured regulatory environment that not only aligns with the EU’s MiCAR but also supports efficient, compliant operations. For CASPs and issuers seeking an EU domicile, Malta’s approach to regulatory supervision, coupled with practical support measures, provides a foundation for compliance under MiCAR that is adaptable, cost-effective, and conducive to sustainable growth within the EU’s digital asset market.

OVERVIEW OF CHAPTER 647

As an EU regulation, MiCAR is directly applicable in Malta. Consequently, Chapter 647 is structured on MiCAR’s flow by first regulating the issuers of tokens, then regulating the service providers; and in the last part providing the framework on the prevention of market abuse, regulatory powers, transitory provisions and appeals.

The purpose of repealing Malta’s Virtual Financial Assets Act and enacting the new Chapter 647 is to further integrate Malta’s legislative framework with the EU’s MiCAR. The exercise ensures that Malta adopts the terminology and structure of MiCAR, thereby facilitating cross-border compliance and ensuring consistent interpretation of regulatory standards for operators selecting Malta as their MiCAR jurisdiction.

The following is a very brief comparison of the EU’ MiCAR’s titles and where they are found in Malta’s Chapter 647:

• MiCAR Preamble: No equivalent in Chapter 647, but Maltese law aligns with MiCAR’s overarching objectives.
• MiCAR Title I: Scope and definitions align with Part I of Chapter 647 (Articles 1–4).
• MiCAR Title II (Crypto-Assets): Matches Part II of Chapter 647 (Articles 5–8). Covers rules for token which are non-asset-referenced or not e-money tokens.
• MiCAR Title III (Asset-Referenced Tokens): Reflected in Part III of Chapter 647 (Articles 9–21). Focuses on issuance, disclosure, and risk management of ARTs.
• MiCAR Title IV (E-Money Tokens): Equivalent to Part IV of Chapter 647 (Articles 22–25).
• MiCAR Title V (Service Providers): Matches Part V of Chapter 647 (Articles 26–34). Covers licensing, governance, and prudential rules for CASPs.
• MiCAR Title VI (Market Abuse Prevention): Reflected in Part VI of Chapter 647 (Articles 35–36). Prohibits insider trading and market manipulation.
• MiCAR Title VII (Authorities and Appeals): Found in Parts VII (Articles 37–48), VIII (Articles 49–53), and IX (Articles 54–57) of Chapter 647. Includes oversight, cooperation, and enforcement rules.
• MiCAR Title VIII (Delegated Acts): No direct equivalent in Chapter 647 but addressed via the MFSA’s fintech rulebook and subsidiary legislation.
• MiCAR Title IX (Transitional Provisions): Corresponds to Part X of Chapter 647 (Article 58). Ensures smooth regulatory transitions from the VFA framework.

MiCAR Preamble and Part 1 in Chapter 647

MiCAR begins with its Preamble, outlining the context and objectives of the regulation. While Chapter 647 does not contain an explicit counterpart to this introductory section, the overarching principles of the Maltese framework align with the EU’s regulatory objectives of fostering innovation while ensuring financial stability and investor protection. Title 1 of MiCAR, dealing with subject matter, scope, and definitions, corresponds to Part I of Chapter 647. The preliminary articles (Articles 1–4) in both texts establish the legal foundation, providing definitions and clarifying the scope of application.

Titles 2-4 on Issuers

Titles 2-4 MiCAR match Parts 2-4 of Malta’s Chapter 647. They both provide rules for issuing three types of digital assets:

• Non-backed cryptos: This category of crypto asset is an umbrella approach to include all crypto assets except ARTs and EMTs. It includes utility tokens which are designed solely to grant access to a product or service offered by the entity that issues it. There are a number of exemptions under this title.
• ARTs: This variant of crypto-asset, distinct from electronic money tokens, strives to preserve a consistent value by linking to another value or entitlement, or a combination of these, including one or multiple recognised currencies, assets, technologies or commodities.
• EMTs: A crypto-asset type that claims to sustain a stable value by mirroring the value of a single official central-bank-issued currency.

Title 5 on CASPs

Title 5 of MiCAR on CASPs supervision is reflected in Part 5 of Malta’s Chapter 647 because Article 3 of Chapter 647 says that crypto assets services shall have the meaning of “that assigned to  it  in  point  (16)  of  Article  3(1)  of  the  MiCA Regulation”.  Point 16 of Article 3(1) MiCAR provides: that a “crypto-asset service’ means any of the following services and activities relating to any crypto-asset:

• providing custody and administration of crypto assets on behalf of clients;
• operation of a trading platform for crypto assets;
• exchange of crypto assets for funds;
• exchange of crypto-assets for other crypto-assets;
• execution of orders for crypto assets on behalf of clients;
• placing of crypto assets;
• reception and transmission of orders for crypto assets on behalf of clients;
• providing advice on crypto assets;
• providing portfolio management on crypto assets;
• providing transfer services for crypto assets on behalf of clients.”

As for MIFID-licensed investment firms providing crypto activities, the position under both MiCAR and Chapter 647 is that the provision of investment services and ancillary services concerning securities tokens, which are classified as transferable securities under MiFID II, are not under MiCAR’s regulatory umbrella. Moreover, investment firms can provide MiCAR services depending on their type of MIFID licence, provided that they follow the exemption procedure in Article 60 MiCAR.

Titles 6-9: Market Abuse, Regulators, Appeals

Title 6 of MiCAR on the prevention of market abuse, finds its equivalent in Part VI of Chapter 647 (Articles 35–36). Both frameworks emphasise prohibiting insider trading and market manipulation, signalling a commitment to maintaining fair and transparent markets.

Title 7 of MiCAR corresponds to multiple parts of Chapter 647. MiCAR’s Title 7 addresses the roles of competent authorities, namely, the European Securities and Markets Authority (“ESMA”) and the European Banking Authority (“EBA”), as well as appeals processes. The equivalent provisions are spread across in Chapter 647 as Part VII (Articles 37–48) on investigative powers, Part VIII (Articles 49–53) on appeals, and Part IX (Articles 54–57) on supervisory cooperation. These sections in Maltese law ensure consistency with EU requirements, particularly regarding regulatory oversight, cooperation, and enforcement mechanisms.

Title 8 of MiCAR on delegated acts does not have an equivalent in Chapter 647. However, this gap is bridged through subsidiary legislation and the MFSA’s fintech rulebook, which is aligned with MiCAR’s delegated acts, namely the regulatory technical standards.

Title 9 of MiCAR, concerning transitional and final provisions, corresponds directly to Part X of Chapter 647, which is captured in Article 58. This section provides the transition of existing legal and operational frameworks to accommodate the new directly-applicable EU rules.

By mirroring MiCAR’s terminology and framework, Chapter 647 reduces interpretative discrepancies and supports a unified approach to crypto asset regulation across the EU. This harmonisation enables service providers to manage compliance requirements with greater clarity and efficiency, fostering a predictable regulatory environment in Malta that makes it attractive for CASPs seeking to operate within a MiCAR-compliant jurisdiction.

RTSs AND THE MFSA RULEBOOK

ESMA and the EBA have a mandate under MiCAR to publish a number of delegated acts which are mostly regulatory technical standards (“RTSs”).

These technical standards are a fundamental component of MiCAR’s framework, providing detailed rules and guidance to operationalise the main regulation text and support its goals of market integrity and investor protection.

The RTSs specify the transparency and disclosure requirements for crypto-asset issuers, particularly for whitepapers. For ARTs and EMTs, the standards provide additional requirements to address the different risk profile, ensuring that investors and regulators have access to sufficient information to assess these products effectively. Numerous requirements for CASPs also emanate from these RTSs. There are also requirements on the suitability of management bodies and shareholders with qualifying holdings in CASPs and some issuers.

The mandate of ESMA under MiCAR also includes the exercise of implementing the anti-money laundering (“AML”) requirements under MiCAR, particularly in relation to the crypto travel rule. These AML requirements ensure that CASPs comply with obligations to include identifying information about the originator and beneficiary in crypto asset transfers, aligning with the Financial Action Task Force (FATF)’s standards. This measure ensures traceability of transactions and helps in combating financial crime within the crypto-asset sector

In the context of market integrity, MiCAR provides for the publication of RTSs to prevent market abuse (including insider trading and market manipulation) within the crypto-asset ecosystem. These standards align with the EU’s MAR, while addressing the specific characteristics and risks associated with digital assets.

As of the date of this insight, not all RTSs under MiCAR have been published. Chapter 647 confirms that the MFSA is Malta’s national competent authority responsible for enforcing MiCAR. While the primary legislative integration of MiCAR into Maltese law is substantively complete for both CASPs and issuers, the implementation of MiCAR’s RTSs and other Level 2 regulations in Malta remains an ongoing process, contingent on further regulatory publications by ESMA and EBA. The MFSA is continuously advancing this integration by embedding the EU’s regulatory standards into the Maltese fintech rulebook, ensuring a cohesive exertion of the EU’s MiCAR in Malta.