Malta Seeks to Remove NFTs from Virtual Financial Assets Act

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  • Malta has indicated plans to remove NFTs from its Virtual Financial Assets framework
  • The framework features other digital assets that operate differently from NFTs
  • Malta wants to make the changes in preparation for the upcoming European Union crypto regulations

Malta has indicated plans to remove NFTs from the country’s Virtual Financial Assets Act as a way to differentiate the unique asset class from other blockchain-powered financial products. Currently, the country bundles NFTs in the same category as e-money, cryptocurrency and anything else built on blockchain platforms. According to Malta’s financial watchdog (MFSA), the grouping is inadequate since digital collectibles can’t qualify as an investment or payment method.

Regulating NFTs Beats the Purpose

The MFSA thinks that the presence of digital collectibles in the act defeats the purpose of the framework which is meant to guide the issuance of blockchain-based assets that have investment capabilities.

Apart from being against the spirit of the Virtual Financial Assets Act, Malta wants to exclude NFTs from its crypto laws in preparation for the upcoming unified regulations in the European Union. Dubbed the Markets in Crypto-assets Regulation (MiCA), the unified crypto regulations are marked to go live in spring 2023, exempting NFTs and other unique virtual assets from regulatory overview across the EU. 

In its current form, Malta’s VFA act requires anyone offering products or services involving virtual assets to seek regulatory greenlight and provide a list of investors before issuing a virtual asset. However, the proposal to strike NFTs out of the VFA framework is currently in the consultation phase which will end on 6 January 2023.

Malta ‘Doesn’t Prevent’ Crypto-based Financial Crimes

Malta’s VFA regulation came into force in 2018 and encompasses ICOs, virtual assets and tokens. The law was among two others enacted in the same period to control blockchain-based products, services and their providers. 

Malta’s move comes a year after the Financial Action Task Force (FATF) accused the country of doing little to curb crypto-based financial crimes. It also comes at a time when the United States and the United Kingdom are looking to create unified crypto regulation, indicating the need to bring accountability in the decentralized world.