Криптофонд на МальтеCryptofund in Malta

In 2018, the state bodies of Malta focused on a course to digitize the economy and settle the legal status of cryptocurrency in the state. Accordingly, special consultation document was published on the website of local regulator (Malta Financial Services Authority / MFSA), that is intended to further legalize the concept of initial coin offering (ICO / ITO / TGE) and initial offering of tokens.

The Maltese government is confident that elaboration and implementation of a regulatory framework for the regulation of cryptocurrencies will create favourable conditions for attracting foreign investors, thereby directly contributing to the development of the country's economy.

At the moment, Malta is quite an attractive jurisdiction for holding an ICO in view of the regulator's loyal attitude to the cryptocurrency, relatively low tax rates and so on.

Given all above features, many entrepreneurs began to select Malta as appropriate jurisdiction for the establishment of cryptocurrency funds, as will be discussed further in this article.

To date, such administrative bodies are engaged in the regulation of cryptocurrencies:

  1. Management of financial services in Malta.
  2. Stock exchange.
  3. Management of gambling industry.
  4. Management of digital innovations.

Activities of such investment funds in this state fall under the definition of collective investment, because it includes:

  • presence of a specialized scheme/agreement on the basis of which the investment process itself is carried out;
  • implementation and execution of collective investments (the concept of "collective" means attracting a rather large number of potential investors in funds);
  • capital acquired by means of offering of units (shares correspond to a classic example of units);
  • diversification of risks (that is, the fund adheres to a strategy aimed at reducing the possibility of negative consequences of investment losses for investors);

and one of the following elements, namely:

  • combination of contributions and profit/income;
  • redemption within a certain period of time (that is, shares, units that are issued, must be redeemed back by the issuing company after a certain period of time)
  • issue of units within specific periods.

Cryptocurrency funds in Malta can be incorporated in the form of professional investment funds. Previously, there was the possibility of creating a cryptofund in one of the following forms:

  • experimental,
  • qualification,
  • extraordinary/priority.

Nowadays, cryptocurrency fund can be established only in the form of qualified investment fund (QIF).

Requirements for the organization of the activity of the QIF:

  • Minimum investment threshold - EUR 100,000
  • it is necessary to draw up a share issue prospectus, the form and content of which must comply with the requirements of current legislation
  • the following shall be appointed in the structure of the fund:
    • Depositary;
    • Administrator;
    • Investment manager must have at least 3 members of the commission in the composition of staff/specialized investment committee. We draw your attention to the fact that one of these employees must have the necessary minimum level of knowledge in the field of blockchain technologies, cryptocurrencies, fintech and so on.
    • Prime broker;
    • Banker
    • Officer (an employee who will be responsible for the development, implementation and execution of anti-money laundering legislation). Moreover, qualification requirements are imposed on him ["must have the necessary experience and knowledge in order to hold such a position"]);
    • Auditor as well as AML officer should have certain experience and qualifications to perform such functions;
    • Officer (qualification requirements are also imposed);
    • It is necessary to maintain and regularly submit two types of reporting (operational, to be submitted every 6 months + annual financial statements).

There are no requirements on the restriction of investments with regard to the activity of cryptofunds (accordingly, the fund can use different categories of assets in its operation, Moreover, the Maltese Regulator welcomes diversification of risks) and restrictions on loans.

Additional requirements for licensed cryptocurrency funds:

  1. As mentioned earlier, persons who manage the activity of a cryptofund must be competent in the field of virtual currencies and DL and have work experience in this field.
  2. Documentation of the fund should contain information on the potential risks associated with investing in cryptocurrency.
  3. It is necessary to test the "quality" of cryptocurrencies, planned to be invested in by the fund. Accordingly, the management of the fund should take into account the perspectives of cryptocurrencies for investments, their technical characteristics, demand and a number of other parameters
  4. The fund shall be subject to the risk management policy.
  5. Competent organization should audit and evaluate the fund's investments in cryptocurrencies. Evaluation can also be carried out by the manager, if management and evaluation do not overlap.

For more detailed information on structuring a cryptocurrency fund in Malta, contact the international law firm Law&Trust International.