Malta to decide fate of Non-Fungible Tokens

Malta is taking a major step forward in the ruling of the blockchain industry.

The Malta Financial Services Authority (MFSA) released a consultation document titled “The Virtual Financial Assets Framework: Non-Fungible Tokens” to obtain stakeholder feedback on the proposed treatment of Non-Fungible Tokens. This could possibly have a major impact on the future of Non-Fungible Tokens. As the MFSA’s decision will determine their fate.

The consultation document

The document covered three questions in relation to:

• The treatment of NFTs under the VFA act.
• The removal of NFTs from the future markets in Crypto Assets Regulation.
• Any further suggestions about NFTs by stakeholders.

The MFSA, in consultation with stakeholders, will now consider the connection and likely results of the answers to these questions. This may result in the change of current laws and rules or the introduction of new ones. The ultimate goal is to make sure that customers are protected. And that the industry has a clear framework in which it can continue to grow.

The proposed treatment of Non-Fungible Tokens

NFTs were the subject of the first question posed by the MFSA. Despite the uniqueness and non-fungibility characteristics of DLT assets, BCAS stated that NFTs (being DLT assets under the Maltese VFA Act) may still be named as VFAs. VFA Act allows companies including themselves in activities related to NFTs that are named as VFAs.

The MFSA had questions about the removal of Non-Fungible Tokens from the scope of the VFA Framework. They suggested that this change needs to be amended by a vote of Parliament. To have the characteristics of uniqueness and non-fungibility removed from the description of ‘Virtual Financial Assets.’ The purpose of the Financial Instrument Test is to assess whether a DLT asset has qualities like uniqueness and non-fungibility; like NFTs. That being said, BCAS does not agree that the description of VFAs should be amended at this time. At the very least; until the final publication of MiCAR. Since the public version approved and proposed by the Council on the 5th of October, cannot be considered final.

Under the MiCAR draft text, most of the consideration of non-fungible tokens are in the recitals 6b and 6c, while the only blanket exclusion is in article 2, which states this regulation does not apply to crypto-assets that are unique and not fungible with other crypto-assets. The wording of the aforementioned recitals is wanting as they lack detail on the terms non-fungible and large series or collection. BCAS thinks that not all NFTs meet the ‘uniqueness’ and ‘non-fungibility’ standard. Some crypto-assets call themselves ‘NFTs,’ but they’re substantially interchangeable. Though the ESAs have yet to issue their guidance about the forthcoming publication of MiCAR in the OJ of the EU, changes may still be made to the Article quoted in this article, as well as relevant recitals, before publication and a possible technical guideline about those changes are still forthcoming from the ESAs.

How RHJ Accountants can help

To conclude, the MiCAR project’s final report will be published soon and, subsequently, RHJ Accountants can then issue all the necessary guidelines.

There is still much to be learned about how this tax law affects individuals in different circumstances. Our expert, Malta accountants will give you professional guidance to keep you up-to-date on what’s best for you.

We are readily available to schedule a meeting and would love to talk with you more about how our accounting services can be of help during this complex situation.

Drop us a message today so we can discuss what can be done. You could also subscribe to our social media page to get regular updates about NFTs in Malta.