Crypto Funds

In the coming days, Malta is awaiting the Virtual Financial Assets Act to become law. When setting up a Crypto fund in Malta, it will be under the Professional Investor Fund (PIF), as stated in the Malta Fund Regulatory Framework.

Malta’s regulatory and supervisory body to financial institutions is the Malta Financial Services Authority (MFSA). Subsequently, this authority authorises and issue licences to investment funds, in accordance with the established schemes and arrangements for Maltese funds.  These funds must have, the collective investment of capital acquired by means of an offer of units for subscription, sale or exchange. These funds need to possess any one of the following characteristics:

 

  • Fund operates according to the principle of risk spreading;
  • Contributions of the participants and the profits or income out of which payment are to be made to them are pooled;
  • At the request of the holders, units are repurchased or redeemed out of the assets of the scheme or arrangement, continuously or in blocks at short intervals;
  • Units are, have been or will be issued continuously or in blocks at short intervals.

 

The risk spreading requirement, however, is not a mandatory requirement to PIFs targeting Qualifying Investors.

Such a VC Fund must target professional investors (as defined by MiFID). They must invest solely in virtual currencies (either directly or indirectly) and need to have assets under management not exceeding €100m in value. In addition, they cannot seek to obtain a European passport to market their units. Each qualified investor also sets a minimum investment of €100k or its equivalent currency in PIF. However, a qualified investor cannot reduce the stated amount of €100k as per Maltese law.

Investment Services Act

The Investment Services Act which encorporates the PIF states that investments made by companies need to allow various types of PIFs. This will include companies having variable share capital (SICAV), limited partnerships or unit trusts. Additionally, a third party Fund Manager can self-manage or externally manage a PIF in a reputable jurisdiction. In comparison, a self-managed PIF has an initial capital of (minimum) €125,000. Whereas capital requirements for externally managed PIFs have no required minimum.

The licensing process consists of three phases that relate to a preliminary meeting with MFSA.

The submission of an application form needs the required and supporting documents. These documents will have to undergo:

  • ‘fit and proper’ checks,
  • ‘in principle approval’ by MFSA,
  • submission of the final approved documentation and
  • finalization of any outstanding matters.

After issuing a license the MFSA is likely to ask for a pre-commencement or pre-licensing of the business.

 

Do you require further information to open up a Crypto Fund in Malta? Contact us on +356 20103020 or by email at [email protected].