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CONSULTATION PAPER ON THE FINANCIAL INSTRUMENT TEST

Introduction

One of the central points for discussion outlined in the MFSA Discussion Paper on Initial Coin Offerings, Virtual Currencies and Related Service Providers (Reference No. 08-2017), (‘the Discussion Paper’), issued on the 30 November 2017, proposed the introduction of a ‘Financial Instrument Test’. The objective of the Financial Instrument Test is to determine whether a Distributed Ledger Technology or DLT asset, based on its specific features, is encompassed under (i) the existing EU legislation and the corresponding national legislation, (ii) the proposed Virtual Financial Assets Act or (iii) is otherwise exempt.
 
It is envisaged that the Financial Instrument Test will be applicable both within the context of an Initial Coin Offering as well as during the intermediation of DLT assets by persons undertaking certain activities in relation to such assets in or from within Malta.
 
The Consultation Paper on the Financial Instrument Test ('the Consultation Paper') presents an analysis of the definitions of the financial instruments listed under the Markets in Financial Instruments Directive ('MiFID') as well as their relevance to DLT assets. The methodology underpinning the Financial Instrument 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.
 
Further to the above, this survey encompasses the 19 questions identified within the Consultation Paper, the responses to which shall be taken into account by the MFSA prior to proceeding with the issuance of the final version of the Financial Instrument Test. A feedback statement shall be issued in due course following the analysis and evaluation of the feedback received from interested parties. 

As indicated in the Consultation Paper, this consultation period shall remain open until the 4 May 2018.
 

Disclaimer: The proposals presented within the Consultation Paper are not binding and are subject to changes and revisions following representations received from interested parties. It is important that persons involved in the consultation bear these considerations in mind.