MFSA publishes Rules on the Supplementary Conditions applicable to PIFs investing in Virtual Currencies
News    ·   31-01-2018
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AUTHOR: Andrew Caruana Scicluna; Andrea Vianelli; Alexia Valenzia

The Malta Financial Services Authority (“MFSA”) has released a circular on the Supplementary Conditions applicable to Professional Investor Funds (“PIFs”) investing in Virtual Currencies (the “Conditions”).  The publication of the Conditions follows the release of the Consultation on the Proposed Regulation of Collective Investment Schemes investing in Virtual Currencies and the Feedback Statement on the Consultation on the Proposed Regulation of Collective Investment Schemes investing in Virtual Currencies, both issued by the MFSA on the 23 October 2017 and 22 January 2018, respectively.

Through the publication of the Conditions, the MFSA has introduced specific supplementary rules which the PIF must comply with when investing in virtual currencies, both at the authorisation stage and throughout the scheme itself.  The Conditions have also been added to the Investment Service Rules for Qualifying PIFs under Part A – The Application Process and as Appendix I to Part B – Standard Licence Conditions

The Conditions state that PIFs proposing to invest in virtual currencies are required to, inter alia;

  • Hold a preliminary meeting between the promoters of the scheme and officials of the MFSA before submitting an application for a licence;
  • Submit additional documentation to the MFSA, including an assessment undertaken by the governing body that the proposed service providers have the appropriate business organisation and expertise in the field of virtual currencies and their underlying technologies and, if applicable, documentation demonstrating that the proposed manager has an investment committee set-up in compliance with section 9.8 of Appendix I to Part B of these Conditions; 
  • In the case of self-managed structures, the scheme is required to submit evidence that the investment committee member(s), or the Board of Directors of the Scheme if no investment committee has been appointed, has sufficient knowledge and experience trading on an established virtual currency exchange. In the case of externally managed funds, it is the manager who must be able to demonstrate that he has the appropriate knowledge and expertise in this field;
  • Ensure that its offering documentation contains the appropriate risk warnings in relation to the proposed direct and/or indirect investments in virtual currencies; and
  • Ensure that the appointed service providers have the business organisation, systems and experience necessary to conduct the required verification and valuation of the PIF’s investments in virtual currencies.

Please find the Circular on the Supplementary Conditions applicable to Collective Investment Schemes Investing in Virtual Currencies here.

 

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