By enacting the Virtual Financial Assets Act (VFAA), the Maltese Government has regulated the Blockchain / ICO / DLT industry. The law appoints the Malta Financial Services Authority (MFSA) as the designated authority to oversee this business.

Since this industry has elements of the Financial Service Regulations (namely MiFID), it is important to clearly distinguish one from the other.

In order to ensure a clear difference, the MFSA has sought to further clarify the instances under which the new legislation applies. It has done this by introducing the Financial Instrument Test, which will be analysed below.


The objective of the Financial Instrument Test (hereinafter ‘the Test’) is to determine whether a Distributed Ledger Technology (‘DLT’) asset falls under:

  • the existing Financial Services legislation (e.g. MiFID)
  • the proposed Virtual Financial Assets Act (‘VFAA’) or 
  • is otherwise exempt.

By undergoing the Test, the DLT asset will be classified accordingly.


The Test will be applied in the following scenarios:

  • In an Initial Coin Offering (ICO); and
  • During the intermediation of DLT Assets by persons undertaking certain activities in relation to such DLT Assets (VFA Services). 

Being the designated authority specifically appointed to oversee this business, the Malta Financial Services Authority (MFSA) is proposing that the Test is mandatory in the above scenarios.

In addition, the MFSA has also proposed that the Test is confirmed by an external reviewer.


It is important to take into account the below definitions:

  • Distributed Ledger Technology (DLT) - means a digital or electronic database or ledger which ordinarily is – 

a) distributed, shared and replicated;
b) public or private or hybrids;
c) permissioned or permissionless or hybrids;
d) protected with cryptography or equivalent forms of encryption; and
e) auditable:

Provided that this term shall also include any other technology that achieves the same ends.

  • DLT Asset means –

a) A Virtual Token; or
b) A Virtual Financial Asset; or
c) A Financial Instrument
That is intrinsically dependent on, or utilises, DLT.

  • Virtual Financial Asset – a VFA is any form of digital medium recordation that is used as a digital medium of exchange, unit of account, or store of value and that is not one of the following as defined below:

a) Electronic Money;
b) Financial Instrument; and
c) Virtual Token.

Legal definitions of the above are analysed in our brochures:

➢ Malta – ICOs – The New Legislation
➢ Malta – Virtual Financial Asset Services – The New Legislation

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