Two-Thirds of Malta's 'Virtual Financial Assets' Agents Failed Compulsory Cryptocurrency Exam

  •  Malta's Virtual Financial Assets (VFA) Act will be effective as of November 2018.
  • Finance professionals such as accountants looking to offer crypto-related services must pass an exam (required by the VFA).
  • Results from an exam administered in September show that examinees performed very poorly.

The Times of Malta reported on Thursday (October 18th) that almost two-thirds of those that applied for a digital currency agent certification failed the standard exam - even though the assessment had been modified to make it easier for candidates to pass the test.

Malta’s Virtual Financial Assets (VFA) Act, which is scheduled to become effective as of November 2018, will require finance professionals looking to “act as agents” in the crypto industry to complete a training course and pass an assessment - which tests how well they understand concepts related to Bitcoin (BTC) and other cryptocurrencies.

The first such examination took place in September and local sources said that around 250 lawyers, auditors, and accountants took the test - which was commissioned by the island nation’s financial regulator, the Malta Financial Services Authority (MFSA).

Negative Marking Scheme

Malta’s Institute of Financial Service Practitioners had been tasked with administering the examination, which included several multiple choice questions (MCQs) that were checked by using a “negative marking scheme.” As most educators would know, a negative marking scheme deducts points from an examinee’s score if they choose the wrong answer.

Notably, the results of the exam - which was designed to test the examinee’s basic understanding of concepts related to blockchain technology and cryptos - showed that the test-takers performed very poorly as the pass rate was very low.

The test administrators then removed the negative marking scheme, however, the pass rate still remained quite low (only 39 percent). After learning that they had failed the test, the examinees expressed frustration because finance professionals will not be issued a license to offer crypto-related services if they cannot pass Malta’s government-administered test on cryptocurrencies.

"Blockchain Island" Strategy

As most crypto watchers would know, Malta is one of the world’s most crypto friendly jurisdictions as the island nation’s authorities believe digital assets have the potential to transform the world’s future economy.

In order to improve the country’s economy and create more jobs for locals, its government introduced the VFA Act - which is among two other laws that are a part of Malta’s “Blockchain Island” strategy.

Moreover, Malta’s progressive laws are aimed regulating its blockchain and crypto industry, while also providing a business environment that is conducive to the growth and development of innovative financial technology.

Malta also needs VFA agents that have passed its crypto exam, because their services are required by local blockchain startups that are planning to conduct initial coin offerings (ICOs).

Qualified VFA agents are also required in cases where companies provide portfolio management and investment advice on digital currencies.

Increasing "Capital Requirements", Adding A Written Section To Crypto Exam

Commenting on the low pass rate, Malta’s authorities said (in September):

[It has] become evident that certain industry players are not sufficiently prepared to register as VFA agents… [there is a] need to address an existing expectations gap, particularly in view of the inherent risks of this sector.

Malta's Government

In September, the MFSA had also proposed adding a written response section to Malta’s exam on cryptocurrencies, in addition to adding other compulsory requirements such as “continuous professional” development and education.

Malta’s regulators further recommended increasing “regulatory fees” and “capital requirements” associated with cryptocurrency licenses and businesses operating in the island.

U.S. Treasury Secretary Steve Mnuchin 'Fine' With Launch of Facebook’s Libra

The secretary of the U.S. Treasury, Steve Mnuchin, has revealed he is “fine” with the launch of the Facebook-led cryptocurrency Libra, as long as the project follows strict financial rules.

According to a report published by Bloomberg, Mnuchin revealed his thoughts on the Libra cryptocurrency while speaking in a Washington, D.C. hearing of the House Financial Services Committee, responding to a question from a lawmaker. He was quoted as saying:

I’m fine if Facebook wants to create a digital currency, but they need to be fully compliant. In no way can this be used for terrorist financing.

Since Libra was announced back in June of this year, Mnuchin revealed he has met with Facebook various times to discuss regulatory concerns, something that slowed the cryptocurrency’s pace towards its launch, expected in 2020.

The cryptocurrency is set to be governed by the Libra Association, and is reportedly going to be backed by fiat currencies and short-term U.S. Treasury bonds. Its backing in terms of fiat is set to consist of the European euro (18%), the Japanese yen (14%), the British pound (11%) and the Singaporean dollar (7%).

During the hearing, Mnuchin also addressed the U.S. potentially developing its own digital currency, and noted that both he and Federal Reserve Chairman Jerome Powell don’t see a need for it in the near future. Mnuchin stated:

Powell and I have discussed this – we both agree that in the near future, in the next five years, we see no need for the Fed to issue a digital currency.

The European central bank, according to a report, may launch its own digital currency if cash usage drops and is the private sector fails to create an efficient solution for cross-border payments, which the financial institution deemed too expensive.

Featured image via Unsplash.