Placing of clients’ money by VFA Service Providers and other subject persons - clarification
The purpose of this article is to clarify some public misconceptions, as well as reported news by various media outlets concerning the need to open a bank account in order to operate within Malta’s regulated environment. In order to conduct operations in Malta through an established legal entity, firstly one does not require a bank account opened with a local bank. Secondly, one does not even require a bank account per se, neither for the operations of the legal entity, nor for the placing of the funds of the respective entity’s clients.
This is clearly stipulated under L.N. 357 of 2018 of the Laws of Malta, titled “Virtual Financial Assets Regulations, 2018”. Specifically, Regulation 16 of the Regulations reads as follows:
16. (1) A subject person shall, on receiving any client money, promptly place such money with any of the following:
- a central bank;
- a credit institution authorised in accordance with the provisions of Directive 2013/36/EU;
- a bank authorised in a third country;
- a money market fund;
- an electronic money institution; or
- a payment institution:
This means that a subject person, ergo a Virtual Financial Asset (VFA) Agent, VFA Service Provider, and/or VFA issuer can utilise the services of MMFs/EMIs/PIs for the placing of clients’ funds, apart from credit institutions and banks authorised in third countries. The Maltese regulator has recognised the limitations, on a global level, currently imposed by credit institutions and banks vis-à-vis the DLT industry, and has catered for such limitations by allowing other EU-licensed entities to also offer their services in this regard. One particular limitation when it comes to use of MMFs/EMIs/PIs is that you need to obtain the written consent of the clients prior to placing their money in a MMF, EMI, or PSP. No such consent is required when placing money with a credit institution and/or other authorised banks.
A general limitation applicable to most institutions which is worth noting is the following:
(5) Where the subject person places client money with a credit institution, bank, money market fund, electronic money institution or payment institution of the same group as the subject person, it shall limit the money placed with any such group, entity or combination of any such group entities so that money does not exceed 20% of all such monies
Naturally, the funds held on the clients’ behalf need to be kept in an account/s separately identifiable from any other accounts used to hold monies belonging to the subject person, as per the following:
(10) The subject person shall take the necessary steps to ensure that the money belonging to the client held in accordance with regulation 16 with a central bank, a credit institution or a bank authorised in a third country, a money market fund, electronic money institution or a payment institution, are held in an account or accounts separately identifiable from any accounts used to hold money belonging to the subject person
We hope that this provides clarity as to the commercial facilities available under the Maltese DLT Regulatory Framework.
For further information, please contact us on info@bcas.io. BCAS serves as your ideal one-stop shop for all your regulatory and technical needs within Malta.
