MFSA To Issue Guidelines For Banks Operating In Blockchain And Cryptocurrency Spheres

Marie-Claire Grima - 29th March 2019

The consultation is open to the public until 30th April 2019.

The Malta Financial Services Authority (MFSA) and the Financial Intelligence Analysis Unit (FIAU) have jointly published a consultation document on guidance for credit institutions, payment providers and electronic money institutions which have the capacity to open accounts for entities using financial technology.

The guidance document is designed to assist companies operating in the fields of financial technology (fintech), artificial intelligence, distributed ledger technology, the internet of things and cloud technologies in their application for a bank account. The consultation is open to the public until 30th April 2019. Industry participants and interested parties are invited to send their responses via email to 

News of the consultation comes in the wake of recent media reports stating that companies involved in blockchain and cryptocurrency setting up a base in Malta were encountering resistance, and even considering leaving the island due to the lack of infrastructural support. A number of Malta-based banks were approached for comment on this topic, and several had no response when contacted.

Meanwhile, a spokesperson for HSBC Malta said that HSBC Group was already making use of blockchain technology and is actively testing applications with customers in areas such as trade finance and foreign exchange.

“Using blockchain to simplify trade finance transactions could significantly boost the volume of global trade. HSBC Malta continues to welcome new commercial customers who meet HSBC’s account opening policies. These policies are the same for blockchain and non-blockchain companies. All banks determine their policies for new customers, based on applicable regulations and their risk appetite,” the spokesperson stated.

A spokesperson for BOV echoed these remarks. “Bank of Valletta extends banking services to a wide range of clients. Relationships and accounts are opened in line with the bank’s risk appetite framework and customer acceptance policy. Each request is evaluated on its own merit and documentation is requested accordingly, as part of the due diligence process.”

Furthermore, the HSBC spokesperson said that HSBC Malta was monitoring the development of virtual and digital currencies such as Bitcoin as well as regulations governing their use. “In countries where use of virtual currencies is permitted by the authorities, we expect any customer transacting in them to comply with all applicable laws and regulations, just as they would for transactions denominated in traditional legal tender. HSBC does not process virtual currency payments and we do not bank virtual currency exchanges.”

The MFSA said that in light of the money laundering and financial terrorism risks which technological innovation may bring about within the financial services sector, it had taken steps, together with the FIAU, to ensure more clarity regarding the opening of accounts. “With this document, institutions can acquire a better risk understanding of prospective customers who are active in technology reliant areas, prior to servicing them. It also details the information which institutions should be requesting from operators to determine their regulatory status and gain comprehensive knowledge on their activities.”

The establishment of fixed guidelines in this arena will surely come as welcome news. Indeed, Kenneth Farrugia, Chief Business Development Officer at BOV and Chairman of FinanceMalta, said that Malta’s banking sector needed to be supported with bespoke and comprehensive regulatory and legislative frameworks to mitigate the risks that new technologies such as blockchain inevitably brought along.

Speaking at the Malta Chamber’s Parliament of Enterprises event held on 13th March, Mr Farrugia said that Malta, whose financial services industry had been painstakingly built through a sound regulatory framework underpinned by a strong reputation going back three decades, had managed to attract a number of fintech companies to its fold, particularly those focusing on the payments space.

“Within this context, the banking sector will need to be supported with bespoke and comprehensive regulatory and legislative frameworks to mitigate the risks that these new technologies inevitably bring along, particularly mindful of the regulatory focus on sustainability and stability of the banking sector, as well as related AML concerns,” Mr Farrugia stated.

“The industry has become an important economic enabler by way of its contribution to the country’s GDP, which has more than doubled in the last few years, and brought about the creation of highly remunerated employment opportunities. Consequently, it is imperative to protect the integrity and reputation of this industry as this will sustain its growth thrusts going forward.”

This article originally appeared in The Malta Business Observer

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MFSA To Issue Guidelines For Banks Operating In Blockchain And Cryptocurrency Spheres