Updated 2pm with IMF excerpt
Dozens of companies involved in blockchain and cryptocurrency are opening up in Malta as a result of the government’s push to be a leader in this sector – but they are encountering resistance when they try to open bank accounts.
Sources from company service providers, legal firms and corporate finance companies contacted by the Times of Malta – who asked to remain anonymous to protect their clients’ confidentiality – confirmed that banks were politely declining their business, saying it was outside their “risk appetite”.
The sources said banks were not distinguishing between cryptocurrency and blockchain, even though the two were not always linked.
Parliamentary Secretary for Financial Services Silvio Schembri told the Times of Malta that he was aware that certain banks were willing to open accounts for blockchain operators but had less appetite for crypto operations.
“One should make a clear distinction between blockchain operators and crypto operators,” he said.
In an effort to resolve the impasse, Mr Schembri said he was holding talks with different banks and other stakeholders “to have a better understanding of the industry”.
“The general understanding is that when it comes to crypto operators, banks are waiting for operators to obtain an MFSA licence before opening their doors – which is understandable,” he said, adding that private initiatives proposing the foundation of innovative banks were also waiting for MFSA review and approval.
The MFSA has received 28 applications since the end of November for registration as VFA Agents under the Virtual Financial Assets Act – one as recently as this week – and that it was aiming to issue the first licences within the first quarter.
Traditional European financial services legislation, such as MiFID, stipulates that an applicant for a licence is to be provided with a reply, on whether or not authorisation has been granted, within six months of the submission of a complete application.
“As Malta’s first line of the defence, the MFSA’s assessment with regard to VFA Agent applications is thorough and includes inter alia a rigorous competence assessment as well as checks on the applicants’ proposed governance and business model,” an authority spokesman told the Times of Malta, saying the timeline depended on the outcome of the due diligence assessment process – including competence in the field of anti-money laundering and the counter funding of terrorism.
The authority also received a number of applications for registration of White Papers, saying that additional documentation was needed prior to initiation of the vetting process, which it was now facilitating.
The International Monetary Fund issued a report on Thursday - the Financial System Stability Assessment Report - which urged caution with regards to virtual-asset investments because of their high risk.
The report cautioned that monitoring the sector would require "significant resources with appropriate expertise, such as cyber risk experts, technology experts and lawyers specialised in technology, creating additional challenges for financial authorities to build and retain expertise".
It "strongly encouraged" the authorities to implement the laws and regulations gradually, imposing strict conditions, such as periodic renewal, to any licence.
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