Malta Wants To Introduce a Test to Determine When ICOs Are Securities

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The European Union nation of Malta proposes to introduce a test that would state an asset acquired from ICOs are securities. In a consultation paper that was released last weekend (which is presently seeking feedback from the public), the Financial Services Authority of Malta (FSA) made a proposal for Financial Instrument Test, which could be eventually become part of their future Virtual Financial Asset Act.


The company said that the method of the test had been built around feedback from the previous discussion paper that they published in November 2017. The publication was used to introduce the concept. According to the recent consultation paper they released, the methodology of the test is made up of three different stages.

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Phases of the Test

The first stage would verify if the assets of distributed ledger fall in the class of “virtual tokens” – this is the term used by the agency to describe utility tokens. According to the Financial Services Authority, every token that falls within this class would be exempted from the Virtual Financial Asset Act.

The second stage of the test would contain assets of distributed ledger technology that can be traded in the secondary market. In this phase, several definitions of security set by the financial regulators in Europe will be applied, including financial derivatives, instruments of money market, and transferable securities.

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The third phase of the test is introduced when the test of the second phase yields a negative result. In this phase, the tokens of an initial coin offering would be regulated under the Virtual Financial Asset Act.

The Financial Services Authority said that this phase of the test would utilize a hybrid framework that adopts both the regulations of the nation as well as that of the European Union. These are the three different test stages the agency wants to work with.


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