Foremost cryptocurrency exchange Crypto.com has achieved another regulatory milestone. The company has bagged a preliminary approval from the Malta Financial Services Authority (MFSA) that governs how fintech companies operate on the island.
New Territories to Conquer
The two approvals are the Financial Institution License and a Class 3 Virtual Financial Assets (VFA) License, according to an official blog post from Crypto.com.
The Financial Institution License empowers Crypto.com to issue electronic money and act as a payment service, while the VFA means it could offer crypto custody services for customers in Malta. The exchange can also execute orders on behalf of Maltese traders and deal on its own account.
It’s worth noting that Crypto.com is yet to receive these licenses. An in-principle license means that the exchange will need to meet some conditions before getting full regulatory approval.
Kris Marszalek, the crypto firm’s co-founder, and CEO explained that the approval was in line with their objective to comply with regulators in the regions they operate. He added,
“Being one of the first cryptocurrency platforms to receive in-principle approval for a Class 3 VFA License and a Financial Institution License is an important milestone and we look forward to securing licenses in more markets throughout 2021.”
Hope for “Blockchain Island” Again
Widely referred to as “Blockchain island,” Malta has been taking significant steps to ensure effective oversight of its crypto industry. In 2018, the MFSA adopted the Digital Innovation Framework with a view on developing a robust regulatory environment for cryptocurrencies and blockchain innovation.
The framework included three acts – the Innovative Technological Arrangement and Services Act, the Digital Innovation Authority Act, and the Virtual Financial Asset (VFA) Act.
Many in the crypto industry saw the VFA to be the most important of all. It required businesses to seek approval with the MFSA before trading digital assets, launching Initial Coin Offerings (IOCs), or providing custody or brokerage services in Malta.
The Act also introduced VFA Agents – so-called “gatekeepers” that provide support and advisory services to crypto firms. The MFSA approved 14 VFA agents in May 2019, although not much was heard from the country since then – especially concerning approval for companies under the VFA framework.
Soon enough, businesses got antsy about Malta and its crypto environment.
In addition to the slow approval processes, reports surfaced that local banks were declining service to blockchain and crypto firms, explaining that opening accounts for the companies was “beyond their risk appetite.”
Silvio Schembri, Malta’s Minister of Economy, told the Times of Malta that banks were reluctant to serve crypto companies because they were waiting for the MFSA to approve licenses.
The MFSA also drew some controversy when it joined several other European regulators in adopting the European Union’s Fifth Anti-Money Laundering Directive (AMLD5).
It is unclear how Crypto.com’s development will impact industry insiders’ view of Malta going forward. However, considering that most have griped about the MFSA’s license regime, this could be an encouraging move.