Malta Proposes Test To Identify When ICOs Are Securities

  • Malta recently set out to create a test that will determine whether assets laucnhed through an ICO should be deemed as securities
  • The test will be a two-stage process and, by the country's report, may see other EU member follow suit.

Malta has recently proposed the creation of tests to determine whether assrts launched through initial coin offerings (ICOs) can be defined as securities.

The island off the coast of Sicily may become the first nation in the European Union (EU) to put forward assessment protocols to measure the credibility of ICOs, while also affording investors a greater level of security through its proposals this week.

In a report published by the Malta Financial Services Authority (MFSA), assessing how tokens should be classified using a multiple stage process would create a better level of security for investors..

The success of Malta's assessment process may, by the reports’ own admission, see other EU members implement it.

"This Consultation Paper presents an analysis of the definitions of the financial instruments listed under Markets in Financial Instruments Directive 2 (‘MiFID’) as well as their relevance and implications to DLT [distributed ledger technology] assets. The methodology underpinning the Test’s determination as well as the considerations which should be taken into account within the context of the EU and national legislative frameworks are also presented."

MFSA

DLTs within Malta will come under a two-stage examination which will help find the right classification for each, on a case-by-case basis. Specific blockchain technology applications or tokens can be exempt from further regulations. In some cases, they may enter the second stage of examination, where the token or DLT would be assessed against different kinds of securities.

The report reads:

"It is being proposed that the Test will consist of two stages, wherein the first stage would effectively determine whether a particular DLT asset qualifies as a Virtual Token (‘VT’)3. Subject to a negative determination during the first stage, the second stage would determine whether the DLT asset would qualify as a financial instrument under Section C of Annex 1 to MiFID."

MFSA

Any token or asset that undergoes these stages of testing may be classified under existing Maltese and EU regulations. During the second stage of testing, these tokens can then be placed under more specific securities categories.

Tokens or DLTs that fail the second stage of testing will then be subject to a third line of assessment. Those that come under this line of testing will be placed under the regulatory oversight of the proposed Virtual Financial Assets Act (VFAA).

Japanese Lawmakers Propose Digital Yen over Concerns Surrounding Libra, China

A group of Japanese lawmakers has started working on a proposal for Japan to issue its own digital currency over concerns surrounding Facebook’s Libra and China’s upcoming digital yuan.

According to Reuters the cryptocurrency, a digital equivalent of the yen, would be a joint initiative between the country’s government and private companies to put Japan “in tune with global changes in financial technology.” Speaking to the news agency Norihiro Nakayama, parliamentary vice minister for foreign affairs, stated:

The first step would be to look into the idea of issuing a digital yen… China is moving toward issuing digital yuan, so we’d like to propose measures to counter such attempts.

The group of lawmakers, comprised of about 70 Liberal Democratic Party members, is led by former economy minister Akira Amari, and plans to submit a proposal to the government as early as next month.

Reuters notes that Japan is unlikely to issue its own digital currency any time soon as there are technical and legal barriers to overcome, although the move comes as the Bank of Japan, the country’s central bank, joined six other central banks to share expertise on creating digital currencies.

The report adds that Shinzo Abe, the country’s Prime Minister, recently told parliament the government will work with the Bank of Japan in studying digital currencies and “ways to enhance the yen’s convenience as a settlement means.” Some Japanese lawmakers, it says, voiced concerns over China’s move to expand the yuan’s influence as a settlement currency.

A former board member of Japan’s central bank, Takahide Kiuchi, was quoted as saying:

The BOJ probably won’t want to do anything that would stifle private-sector innovation. The best way could be to issue a hybrid-type digital currency that is operated and issued by private firms, with the central bank’s involvement.

Kiuchi noted he believes China and Japan have different motives to issue their own cryptocurrencies. While china ants to enhance the yuan’s influence, Japan would be trying to change its cash-loving culture.

Japan, it’s worth noting, has been accepting bitcoin as legal tender since April 2017, and is home to various prominent cryptocurrency businesses.

Featured image via Unsplash.