Malta prepares to revise regulatory treatment of NFTs

The revision seeks to remove nonfungible tokens from Malta’s Virtual Financial Assets Framework.

The Malta Financial Services Authority (MFSA) is currently reviewing requests to revise the “regulatory treatment” of Non-Fungible Tokens (NFTs) within its Virtual Financial Assets Framework. 

Under the current regulatory framework, NFTs are included within the scope of the Virtual Financial Assets Act, which also includes virtual tokens, virtual financial assets, electronic money, and all financial instruments built, or dependent on, Distributed Ledger Technology (DLT).

However, the MFSA is proposing to have NFTs removed from the Virtual Financial Assets framework since they’re unique and nonfungible and therefore incapable of being used as payments for goods and services, or for investment purposes. 

According to the MFSA, “the inclusion of such assets within the scope of the VFA framework may run counter to the spirit of the Act, which sought to regulate investment-type services offered in relation to VFAs falling outside the scope of existing traditional financial service asset categories. “

The governing authority is currently inviting feedback from stakeholders before officially implementing these new revisions into its framework. 

Related: Chinese court says NFTs are virtual property protected by law

In November, Cointelegraph reported that Malta was leading the way in Southern Europe with regard to cryptocurrency regulation. 

In 2018, the Maltese parliament enacted three laws establishing a comprehensive regulatory framework for blockchain and digital currencies. The Virtual Financial Assets Act regulates the field of initial coin offerings, digital assets, digital currencies, and related services, while the Innovative Technological Arrangements and Services Act enables the Malta Digital Innovation Authority to oversee the registration of technology service providers.

The country’s current financial regulatory framework recognizes four distinct categories of digital assets, subject to different sets of rules: electronic money, financial instruments, virtual (utility) tokens and virtual financial assets (VFAs).