Cap. 590 Art. 38Minister’s power to make regulations. 

(1) The Minister, acting on the advice of the competent authority, may make regulations to give effect to the provisions of this Act, and without prejudice to the generality of the foregoing may, by such regulations, in particular, do any of the following:

(a) amend the definitions contained in this Act;

(b) regulate the activities of issuers and licence holders, as well as services provided and activities carried on in conjunction therewith or in relation thereto; provide for any matter he may deem expedient including the creation and exercise of rights by or for the benefit of the public, the imposition of duties and obligations on the issuers, licence holders or persons responsible for the management or administration thereof, the regulation of branches established by licence holders, outsourcing or agency arrangements and of any fees and, or any other charges imposed directly or indirectly on investors; prescribe investment restrictions applicable to retail investors investing or wishing to invest, as applicable, in virtual financial assets, and for the purpose of this paragraph "retail investor" shall mean an investor who is considered to be a retail client in terms of Article 4(11) of MiFID but shall exclude any retail client who may be treated as professional on request within the meaning of Annex II to MiFID; provide for the safekeeping and custody of the cryptographic keys and for the requirement to appoint a custodian, and prescribe and regulate in the most extensive manner the functions, duties, responsibilities and obligations of the custodian, and for the purpose of this paragraph "custodian" shall include a sub-custodian; require the keeping of records with respect to the transactions and financial position of issuers and licence holders and for the inspection of those records, and prescribe reporting and disclosure requirements, including the preparation of periodical reports and the furnishing of those reports to investors, unitholders and to others;

(c) establish schemes or other arrangements for the compensation of investors in cases where licence holders or any categories thereof as may be specified, are unable to satisfy their obligations towards investors or claims in respect of any liability incurred by them in connection with the carrying out of any activity in regard to which they are licensed, and to regulate the management and the financing of any such schemes or arrangements, and the contributions and levies to be paid thereto, to set the minimum and maximum levels of compensation payable thereunder and may under such schemes and arrangements distinguish between different classes of investors and exclude certain classes from compensation, and to make provision for the regulation of and for any other aspect related to such schemes or arrangements and may moreover provide that such schemes or arrangements as may be prescribed shall have a legal personality distinct from that of the contributors thereto and of the competent authority and provide for the judicial and legal representation thereof; and such schemes shall be exempt from the payment of income tax as from the date of establishment of such schemes;

(d) define the criteria for determining whether a holding is an indirect holding for the purposes of determining whether a qualifying holding exists;

(e) define the criteria for determining whether the systems and security access protocols of issuers, applicants or licence holders, as applicable, meet or are maintained to the appropriate high international standards that may be established from time to time;

(f) regulate the promotion or sale by or on behalf of any issuer or licence holder, and by any means, of an initial virtual financial asset offering or of a VFA service or of any DLT asset, including the criteria and procedures for the granting or refusing of consent by the competent authority pursuant to the provisions of article 30;

(g) amend the provisions of article 50 on the circumstances in which auditors are obliged to communicate information to the competent authority, to prescribe regulations governing the disclosure by auditors of information pursuant to article 50 and to establish supervisory and disciplinary procedures for auditors in respect of their duties under the provisions of article 50;

(h) regulate the drawing-up, registration, publication and distribution in Malta of whitepapers relating to offerings, admission or trading of virtual financial assets on a VFA exchange where the respective issuer’s head office is located in a country outside Malta and to make provision for the recognition of such whitepapers taking into account the obligations emanating from European legislation or Malta’s international commitments;

(i) provide for and regulate the payment by any person of registration, licence or other fees and such other charges payable to the competent authority in respect of any matter provided for, by or under this Act or any regulations made under this article, as may be prescribed;

(j) exempt any issuer, licence holder or any other person, VFA service, DLT asset, whitepaper or advertisement from any one or more of the provisions of this Act subject to such variations, additions, adaptations and modifications as may be prescribed and subject to such conditions or other requirements, including other forms of registration, authorisation and notification procedures, as may be prescribed;

(k) establish prudential requirements for licence holders; regulate the supervision on a consolidated basis, provide for the consultation, co-ordination, co-operation and the sharing and exchange of information with national, European and other third country regulatory authorities as may be necessary; provide for the exchange of information with the ESRB, central banks which are members of the European System of Central Banks, including the Central Bank of Malta, exchange of information with ESAs and exchange of information with other departments of government administrations in other Member States responsible for the law on the supervision of institutions, financial institutions and insurance undertakings and with inspectors acting on behalf of those departments as may be necessary; provide for the establishment of colleges of supervisors; provide for the exercise of powers by the competent authority on issuers and licence holders, or their effective managers; provide for the establishment and imposition of administrative penalties on issuers, licence holders or others as specified therein or other measures for the contravention of any of the regulations, and to provide for appeals therefrom to the Tribunal or any other tribunal that he may prescribe; provide for the obligations of the competent authority to report to the ESAs and the European Commission as may be required and specified in the said regulations;

(l) provide for reporting and other requirements and conditions which a person must satisfy, on a continuing and ongoing basis and to establish the circumstances and the manner in which requirements and conditions may be varied, suspended or revoked;

(m) establish centralised or decentralised data repositories or other arrangements for the collection, recording, organisation, structuring, storage, adaptation or alteration, retrieval, consultation, use, disclosure by transmission, dissemination or otherwise making available, alignment or combination, restriction, erasure or destruction, in accordance with European legislation, of such information and documentation as may be required by subject persons to fulfil their customer due diligence requirements provided for under the Prevention of Money Laundering and Funding of

Terrorism Regulations; and to make provision for the regulation of and for any other aspect related to such data repositories or arrangements and may moreover provide that such data repositories or arrangements as may be prescribed shall have a legal personality distinct from that of the subject persons thereto and of the competent authority and provide for the judicial and legal representation thereof;

(n) in consultation with the competent authority, amend the Second Schedule in order to include any services which relate to virtual financial assets and which are not listed in the said Second Schedule and make regulations relative thereto;

(o) transpose, implement and give effect to the provisions and requirements of Directives, Regulations and any other legislative measures of the European Union requiring transposition and, or implementation, as they may be amended from time to time, including any implementing measures that may be issued thereunder and relating to DLT assets, issuers, licence holders and others as may be specified therein; regulations made under this paragraph, and strictly related to transposition or implementation as aforesaid, may provide that any provision of this Act or of any other law shall not apply to matters falling under the regulations, and that in so far as any of the provisions of the regulations are inconsistent with the provisions of this Act or of any other law, such provisions in any such regulations shall prevail;

(p) provide for arrangements for the investigation of complaints about issuers or licence holders;

(q) prescribe anything that is to be or which may be prescribed;

(r) provide for any matter incidental to or connected with any of the above.

(2) Regulations made under this article may also contain provisions for enabling a person who has entered, or offered to enter, into a VFA agreement with a licence holder to rescind the agreement or withdraw the offer within such period and in such manner as may be prescribed, and in particular, but without prejudice to the generality of the foregoing, may make provision -

(a) for requiring the service of notice with respect to the rights exercisable under the regulations;

(b) for the restitution of assets and the making or recovery of payments where those rights are exercised;

(c) for such other matters as are incidental to or connected with any of the above.

(3) Regulations made under this article, may be made subject to such exemptions or conditions as may be specified therein, may make different provision for different cases, circumstances or purposes and may give to the competent authority such powers of adaptation of the regulations as may also be so specified.

(4) Where regulations have been made in terms of this article, the competent authority may issue rules within the meaning of article 15 for the better carrying out and to better implement the provisions of the regulations.

(5) Regulations made under this article may impose:

(a) administrative penalties which may not exceed one hundred and fifty thousand euro (€150,000) for each infringement or failure to comply, as the case may be;

(b) punishments or other penalties in respect of any contravention or failure of compliance not exceeding a fine (multa) of fifteen million euro (€15,000,000) or up to three times the profits made or losses avoided by virtue of the offence, whichever is the greater, or to imprisonment for a term not exceeding six years, or both such fine and imprisonment; and

(c) administrative penalties and fines higher than one hundred and fifty thousand euro (€150,000), where deemed necessary or appropriate for any contravention of or failure of compliance with any EU Directive or EU Regulation or of any regulations made under this article to transpose or to give effect to any EU Directive or EU Regulation.

(6) Regulations made under this Act and any amendment or revocation of such regulations, may be published in the English language only.

(7) The exercise of any of the powers assigned under this article shall be subject to any obligations or rights arising from Malta’s international commitments.