Cryptocurrencies or cryptos as they are commonly referred to are taking over the global trade and commerce industry, including Malta. When compared to other countries, Malta is one step ahead in creating an efficient and conducive environment for cryptocurrencies to survive and thrive. The country has already set out numerous regulations to govern the issuance of initial coin offerings or ICOs. The body tasked with implementing these regulations is none other than the Malta Financial Services Authority (MFSA). Although there is still a lot that needs to be done in terms of establishing a comprehensive legal framework that deals with governing the ever growing number of initial coin offerings, the first and biggest step towards this goal has already been taken.
The public has played a big part in embracing cryptocurrencies as a mode of crowdfunding and investing. More and more people are now willing to use initial coin offerings as a mode of investing their hard earned cash.
What Are Initial Coin Offerings?
According to Maltese law, initial coin offerings are crowdfunding campaigns through which investment companies can raise funds for specific activities or projects. Malta has a slightly different law governing ICOs when compared to other countries because it treats ICOs as a type of crowdfunding which makes it easier to draft regulations for the future. The laws and regulations that govern the creation and sale of initial coins are still under legislation so there is a lot of room for growth and expansion.
Currently, Malta ICOs are considered forms of investment funds and this means that professional investors can buy and sell ICOs at their discretion. As you may already know, Malta is one of the most advanced countries in Europe in terms of financial stability and legislation. Investors from all over the world come to Malta to enjoy the strict but favorable regulations that govern investing and investment funds.
Creation and Sale of Cryptocurrencies In Malta
Both local and foreign investors who wish to create initial coin offerings in Malta must first register legal companies within the country. They can then issue and market the virtual currencies to other investors and investment firms in the country and other parts of the world. Malta ICOs can be exchanged for shares in a company or traded as securities or instruments in the financial markets. However, the country’s laws and regulations must be adhered to for all these applications of ICOs. Some of the rules that need to be followed include:
– The owner or manager of the company issuing the initial coin offering must have sufficient knowledge and experience in regards to virtual currencies, blockchain technology and the global financial market.
– The company issuing the ICO must provide a clear warning to investors detailing the risks involved in buying the respective virtual currencies.
– The risk involved in the issuance, sale and buying of the initial coin offering must be verified by an independent third party.
– The company issuing the ICO must be duly registered and evaluated before issuing its initial virtual tokens.
It is good to note that the above rules and regulations only apply to initial coin offerings being issued in Malta.
The ICO Process
Malta ICOs provide a high level of efficiency and liquidity for capital creation while minimize transactions costs. For the last couple of years, initial coin offerings have been primarily used by cryptocurrency communities, financial technology start-ups and crypto start-ups to raise funds. However, since 2017, legacy enterprises that have established companies and products are also using initial coin offerings to raise funds for their business activities.
In actual sense, ICOs are informal IPOs that remove banks and financial institutions from the picture. ICOs also lack the huge number of regulators and venture capitalist commonly found in IPOs. The ICOs have expanded the world of crowdfunding to accommodate retail investors and enable small and medium companies to raise capital at much lower cost than conventional funding techniques.
Another major characteristic of ICOs is that they allow borderless buying and selling of virtual currencies with minimal conflicts and transaction delays. Promoters of a specific virtual token can bypass existing business, jurisdiction and legal hurdles to directly sell their product to investors from all over the world. Backers of initial coin offerings contribute funds (in fiat or cryptocurrencies) in exchange of tokens issued by the ICO company. The initial sale is somewhat an advance sale of product to consumers who have faith in its success in the future.
The ICO company can use the funds it raises to further develop the product to increase its range of application. The initial token holders act in the same as initial investors in an IPO in that they anticipate the value of a token will increase in time once demand increases. More and more ICOs are expected to be hosted in Malta in the coming year.