Fintech Insights #9 –
Tokenisation in Malta

Tokenisation is the process of converting legal rights of a real-world-asset (“RWA”) into a digital token that is recorded on a decentralised ledger. Asset-referenced tokens (“ARTs”) can tokenise physical assets such as buildings and commodities; or intangible assets including bonds, equities, intellectual property, quarrying/mining rights or renewable energy credits.

ARTs provide a decentralised and transparent way to manage and transfer ownership. The process often involves the use of smart contracts, which automate and enforce the terms of agreements, enhancing efficiency and reducing counterparty risks.  Unlike derivative products, RWA-backed tokens which are licensed as ARTs confer an immutable legal title of ownership.

In asset management and investment services, tokenisation offers new opportunities for fractional ownership and increased liquidity. Assets can be fractionally tokenised, enabling investors to purchase small, manageable portions while increasing liquidity in traditionally illiquid markets through improved capital mobility opportunities.

Maltese Laws governing ARTs

The EU’s Markets in Crypto-Assets Regulation (“MiCA Regulation”) provides a framework for the regulation of digital assets, including tokens classified as ARTs.

Article 3(6) of the MiCA Regulation defines an “asset-referenced token” as “a type of crypto-asset that is not an electronic money token and that purports to maintain a stable value by referencing another value or right or a combination thereof, including one or more official currencies”.

Chapter 647 of the Laws of Malta (the “Maltese MiCA Act”) integrates the EU’s MiCA Regulation in the same manner by distinguishing between ARTs, e-money tokens, and other digital assets.

The MiCA Regulation requires issuers of ARTs to adhere to MFSA rules and the EU’s regulatory technical standards (“RTSs”) on governance, transparency, and prudential requirements to ensure market stability and investor protection.

When does a tokenisation project require licensing?

The fundamental financial regulatory principles of investor protection, market stability and transparency transcend the ever-evolving underlying technology. At its core, tokenisation is an innovative technology which complements (without replacing) existing licensable activities. If an activity requires licensing, the involvement of tokenisation does not eliminate the need for the usual licensing process that would apply in the absence of tokenisation.

In fact, the European Securities and Markets Authority (“ESMA”) clarified in December 2024 that if a product is classified as a financial instrument under the EU’s Markets in Financial Instruments Directive (“MiFID”), MiFID law supersedes MiCA. If one were to apply the maxim lex specialis derogat legi generali in this context, MiCA law would only supersede MiFID if the MiFID licence-holder obtains an exemption to provide MiCA activities under Article 60 of the latter.

Current fintech laws do not seek to regulate how the underlying technology operates. If a tokenisation project will neither involve a financial activity nor a licensable crypto activity, the tokenisation project is presumably outside the scope of regulatory supervision and will not require licensing from the Malta Financial Services Authority (“MFSA”).

While some tokenisation projects may not require a licence, operators should never assume that their activities fall outside the scope of financial regulatory requirements. Potential tokenisation operators are always advised to draft a detailed business plan and obtain a formal legal opinion before commencing any tokenisation activities that are presumed to be exempt from licensing obligations.

A key method in determining whether a tokenisation project requires licensing is to analyse the project’s tokenomics.

Tokenomics

Token economics (or tokenomics), involves the design and management of token-based systems within distributed ledger technology (“DLT”) systems, mostly blockchain. It examines how tokens are issued, distributed, and utilised to align participant incentives effectively. This concept underpins the functionality of DLT projects by structuring the rules and mechanics governing token usage.

Tokenisation enables the digital representation of assets on a DLT, offering several advantages across industries. Key benefits include:

• Improved Liquidity – Fractional ownership allows more participants to access traditionally illiquid markets, such as real estate or private equity.
• Wider Accessibility – Tokenisation reduces barriers to entry, enabling smaller investors to engage in asset classes previously limited to institutions, effectively mobilising capital which may be sitting idle in savings accounts as part of the EU’s efforts towards a capital markets union.
• Transparency – DLT technology provides a transparent, tamper-proof record of transactions and ownership.
• Cost Efficiency – By reducing reliance on intermediaries, tokenisation lowers transaction fees and accelerates settlement times. Transfer fees are also reduced as RWA-backed tokens can be traded on crypto exchanges if listed therein.
• Automated Processes – Smart contracts facilitate automation of complex operations, such as dividend distribution or governance voting.
• Global Accessibility – DLT’s decentralised nature supports cross-border transactions.

These benefits make tokenisation an innovative method for raising capital from decentralised digital wallets whilst modernising asset management and enhancing investment banking operations. Nevertheless, these benefits do not alter the overarching financial regulatory obligations. Entities must still obtain the relevant licence under applicable regulatory frameworks if their activities fall within scope of the respective financial/crypto regime. For instance, if the tokenisation project involves a collective investment scheme characterised by the pooling of assets and risk spreading, an investment fund licence will likely be required unless a specific exemption applies.

Benefits for setting up a tokenisation project in Malta

A MiCA licence in one EU Member State gives right to offer the token across the whole EU market. Malta is an attractive jurisdiction to establish and manage tokenisation operations for the European market. Although MiCA applies uniformly across the EU, Malta’s framework provides a number of advantages for structuring tokens with international RWAs.

Malta’s financial regulator, the MFSA, has experience with digital assets, having introduced the Virtual Financial Assets Act in 2018 (which will be repealed by mid- 2026 following Chapter 647’s enactment). The old regulatory framework closely resembled the MiCA Regulation, as both are grounded in principles derived from MiFID. This alignment means that the MFSA entered the MiCA era well-prepared. Entities establishing tokenisation initiatives in Malta benefit from working with a regulator that has effectively pre-empted MiCA’s requirements and practised them ever-since.

For tokenisation projects requiring intra-group operational efficiencies, Malta’s approach to outsourcing under MiCA is particularly advantageous. Recognising the limitations of a small island economy, Malta embraces the EU’s principle of proportionality, allowing for flexibility in regulatory implementation. While MiCA mandates that critical functions remain within the jurisdiction of the licence issuer, Malta permits the outsourcing of non-core functions, provided that compliance, risk management, and essential controls are retained domestically. This proportionate approach allows tokenisation projects to leverage cost-effective outsourcing for activities such as software development or non-critical administrative tasks, while ensuring that key regulatory oversight functions remain anchored in Malta.

A fundamental component of any tokenisation project is the establishment of a legal entity, which MiCA requires for all applicants. Malta offers a straightforward process for setting up companies, trusts, or partnerships, underpinned by company law based on English Common Law. This legal framework is familiar to international businesses and ensures clarity and reliability for structuring tokenization in Malta. Malta’s recognition and regulation of trusts also provides added flexibility for structuring asset ownership and governance within tokenisation ecosystems.

As with regards to integration with traditional financial systems to manage fiat-related transactions, Malta’s infrastructure for payments and electronic money institutions (“EMIs”) offers tokenisation projects access to reliable payment services. Payment service providers (“PSPs”) and EMIs in Malta are regulated under the Financial Institutions Act which transposes the relevant EMI and PSP EU legislation in Malta. The island’s ecosystem ensures that tokenisation projects can efficiently process transactions, maintain liquidity, and safeguard client assets, all while meeting MiCA’s requirements.

Application considerations

 The application process for ARTs has been delineated by the MFSA in a circular  titled ‘Publication of Applications for Issuers of Asset-Referenced Token’. The MFSA has a specific application form applicable to entities wishing to offer ARTs to the public or admit ARTs to trading from Malta and who are seeking authorisation in terms of Article 18 of the MiCA Regulation. The application form can be found here and the MFSA’s ‘Process Authorisation Charter’ can be viewed here. The MFSA’s guideline for filling the application is accessible here. Other MFSA forms which would need to be filled in terms of the ARTs section on the MFSA’s authorisation portal are the: AX01 – Corporate Questionnaire; AX02 – Involvement Suitability Assessment; AX03 – Third Party Outsourcing Assessment; AX05 – Extended ICT Questionnaire.

Issuing a token in Malta under the current regulatory framework closely resembles the process for conducting an initial coin offering under Malta’s old Virtual Financial Assets framework. However, the MiCA Regulation introduces stricter compliance standards, particularly for asset-referenced tokens and other regulated crypto-assets. Entities issuing tokens from Malta are required to prepare a detailed whitepaper similar to a prospectus for investment funds or other traditional financial instruments. This document must provide clear and accurate information regarding the token’s underlying assets, the terms of token issuance, associated risks, and governance structure. The whitepaper must be submitted to the MFSA for approval prior to the token being offered to the public or admitted to trading on a regulated platform.

Other considerations

As an additional element of decentralised finance, tokenisation facilitates raising capital, lending, borrowing, and trading. Beyond financial markets, tokenisation has broad applications in supply chain management, data privacy, and digital identity. For instance, in real estate, tokenisation enables fractional ownership, allowing investors to purchase parts of high-value properties with minimal capital. Tokenisation projects could include tokenising intellectual property rights to enable royalty sharing, tokenised carbon credits to facilitate transparent trading in sustainability markets, and tokenised supply chains to enhance transparency and traceability in global trade.

The inherent financial legal principles of investor protection, financial stability within markets, and monitoring outsourced activities remain unchanged. Rather than supplanting existing methods of raising capital and managing investments, tokenisation serves as a complementary approach, introducing tools to enhance liquidity, transparency, and operational efficiency through the ability to fractionalise ownership. Such process makes previously illiquid assets accessible to a broader market which increases capital flow while maintaining the regulatory safeguards required for functional regulatory fintech supervision.