Malta's cryptocurrency market regulator has stated that there is no risk associated with local licenses issued under the Markets in Crypto-Assets Regulation (MiCA) following a recent peer review conducted by EU regulatory authorities.
"Due to the results of the peer review, there is no risk of revocation or reassessment of Malta's MiCA licenses," a spokesperson for the Malta Financial Services Authority (MFSA) told Cointelegraph, adding that the agency has begun addressing the issues identified in the review.
This statement was made after the European Securities and Markets Authority (ESMA) — the main European regulator overseeing MiCA compliance — released a peer review report on certain MiCA authorization gaps of the MFSA on Thursday.
The MFSA stated that despite some level of skepticism within the community, Malta remains committed to closely cooperating with EU authorities, and its role as a proactive leader in cryptocurrency regulation is not in doubt.
The MFSA spokesperson noted that the ESMA report recognizes the regulator as an efficient overseer.
"Given that Malta has been a pioneer in cryptocurrency regulation since 2018, this is not surprising," the spokesperson said.
"I believe this review reflects well on Malta; many forget that Malta was already fully regulating crypto asset service providers (CASP) before MiCA was even conceived," Nathan Catania, a partner at XReg Consulting, told Cointelegraph.
Since the introduction of three cryptocurrency-related bills in 2018, the Maltese government has become a pioneer in European cryptocurrency regulation.
"Malta is the first country to regulate distributed ledger technology (DLT) and crypto assets in such a comprehensive manner, covering both technology and financial service components," the MFSA stated in a July 2018 announcement.
In the review, ESMA outlined several recommendations to the MFSA and other national competent authorities (NCA) in the EU to ensure appropriate regulation under MiCA.
EU regulators specifically emphasized the need for timely assessments of CASP growth plans, reviews of conflicts of interest in multi-service CASPs, and evaluations of risks associated with decentralized finance (DeFi) and unregulated service exposure.
"We believe this review further enhances the confidence of those considering applying for licenses in Malta, as well as our peers in cross-border regulatory frameworks," MFSA CEO Kenneth Farrugia noted in an official statement responding to the review.
According to the agency, the MFSA expects to fully implement the recommendations from the report by September.
Despite the recent focus on Malta in the peer review, ESMA emphasized that the review was aimed at all NCAs across the EU.
"ESMA sought to review the MFSA's approach to authorizing and regulating companies, but not to examine the operations of specific companies," an ESMA spokesperson told Cointelegraph, adding:
"In the future, ESMA will continue to use peer review tools as appropriate, including those involving other jurisdictions and topics."
The regulator also highlighted that the peer review included recommendations to be considered in ongoing regulatory work and future procedural authorizations.
While many view ESMA's peer review of Malta's cryptocurrency regulation as generally positive, the country's approach to cryptocurrency regulation has also faced scrutiny.
Malta has long pursued its vision of becoming the "Blockchain Island," requiring cryptocurrency platforms to obtain financial services licenses in 2018. However, in 2020, 70% of initial applicants failed to obtain licenses, leading many to speculate that the rules were too stringent.
In 2021, a department within the Malta Chamber of Commerce refuted allegations that the country had failed to maintain proper regulatory oversight of cryptocurrency businesses.
In 2022, the Malta Times also reported that the collapsed cryptocurrency exchange FTX had two companies registered in Malta, but the MFSA stated that neither company had obtained a license to provide services.
Some investigations have pointed out that Malta has taken a "fast and loose approach" to attracting cryptocurrency companies, emphasizing that as of 2023, 85% of cryptocurrency businesses registered in Malta ultimately left the island after a two-year transition period.
Related: Thou shalt not promote: Vatican Bank denies involvement in false "Vatican Chamber" crypto token promotion
Original article: “Malta Regulator: No Risk to Local MiCA Licenses After EU Review”
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