The Malta Gaming Authority (MGA) has launched a public consultation document on the use of Distributed Ledger Technology (DLT) and the acceptance of Virtual Currencies (VC) within the remote gaming sector through the implementation of a sandbox approach (test and learn), whilst also drafting guidelines for the adoption of DLT within the industry.
The sandbox approach is aimed to commence during the second quarter of 2018 and will last for a period of six months.
The MGA will be accepting use of VCs as a means of payment subject to the satisfaction of a number of conditions, in order to ensure investor protection and to be able to address issues of scalability. The MGA retains full discretion in evaluating whether the necessary criteria are satisfied through the adoption of a risk-based approach.
Custom tokens created by operators which have been licensed to operate a remote gaming operation by the MGA may be accepted or rejected as an acceptable VC to be used for means of payment on a case-by-case basis. The acceptance by the MGA for use of custom tokens is without prejudice to any other regulatory requirements which may be required by any other relevant authority.
Online gaming operators may also make use of smart contracts for purposes of implementing or executing a gaming transaction and automating pay-outs to players, which may be done directly to players’ wallets. Full verification, including wallet verification and player’s identity and full Customer Due Diligence must be in place for each player prior to any pay-out being affected. Remote gaming operators who wish to allow players to make deposits with VCs must also follow adequate procedures as carved out in the consultation document.
For the duration of the sandbox test period, the MGA will be accepting games which are hosted, fully or partially, on a blockchain. All gaming operators are to have their own wallets for supported VCs for fund storage or as an intermediate wallet. Gaming platforms will not be used to carry out exchanges between different types of VCs. Interested parties who wish to participate in the sandbox period are to submit the necessary documentation which will be evaluated by the MGA for the purposes of issuing of a remote gaming licence which will accept VCs as a means of payment.
The consultation document affirms the MGA’s proactive position in the adoption of VCs and DLT within the gaming industry, while being mindful of the challenges (such as issues of volatility of VCs, calculation of exchange rates and implementation of restrictions on withdrawals) and addressing concerns of the industry (adequate CDD, anonymity/transparency and ensuring regulatory requirements are upheld at all times).
At the end of the sandbox period, the MGA will undertake an evaluation of the results of this test in order to be in a better position to determine the appropriate legal framework within which such operations may be carried out in Malta.
Disclaimer
This document does not purport to give legal, financial or tax advice. Should you require further information or legal assistance, please do not hesitate to contact Dr. Antoine Camilleri or Dr. Christina Scicluna