Digital Assets Exchange
The Service is owned and controlled by Tokenomica Malta Ltd. (Tokenomica), a company organized under
the laws of Malta, with registered office at Office 2, Suite 2, the Penthouse, Capital Business
Center, Entrance C, Triq Taz-Zwejt, San Gwann SGN3000, Malta.
Tokenomica Malta Ltd. operates a trading facility known as an ‘exchange’ which engage in providing users of the exchange with a platform on which they can buy and sell virtual assets.
On October 30th, 2018 Tokenomica Malta Limited informed the MFSA that it shall be availing itself of the transitory provision under the terms of Article 62 of the Virtual Financial Assets Act in relation to the following activity and/or services as a Class 4 VFA Service Provider.
After the transitory period, Tokenomica Malta Limited intends to obtain a Class 4 VFA Service Provider license in accordance with the Virtual Financial Assets Act. While conducting its business Tokenomica Malta Limited will take all required efforts to comply with existing Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations applicable for the regulated financial market and thus will meet highest market standards.
Being a VFA Service Provider, a Tokenomica Malta Limited would need to comply with such rules prior to and once such rules are in force:
- A minimum and initial ongoing capital of EUR 730,000.
The entity operating the VFA Exchange must have the following procedures in place:
- AML and KYC Policy;
- Outsourcing policy;
- Remuneration policy;
- Cyber Security framework which consists of, inter alia, a business
- continuity plan and disaster recovery procedure;
- Accounts policy and procedure;
- Record keeping policy;
- Conflicts of interest policy.
- License holders must appoint a money laundering reporting officer (MLRO), a compliance officer and risk manager.
Type of Assets
Only VFAs may be listed on the VFA Exchange. Tokens which classify as financial instruments would not be able to be listed on VFA Exchanges licensed in terms of the VFAA.
For each and every VFA to be listed on the exchange, the board of directors of the licensed entity shall be obliged to conduct the FI Test and have it endorsed by the appointed compliance officer. The compliance officer may be a VFA Agent and the licensed entity may also opt to supplement its assessment with a legal opinion stating that the relevant DLT asset is indeed a VFA. A legal opinion is required when operating prior to the VFAA coming into force.
Crypto to Fiat and Fiat to Crypto Exchange
Both crypto-to-crypto and fiat-to-crypto exchanges are covered under the VFAA, specifically under the Class 4 license of the VFAA. Tokenomica Malta Limited allows users to exchange crypto to fiat and vice-versa, but will not be handling fiat currency deposits and/ or withdrawals directly, rather than through a partner financial institution.
Tokenomica Malta Limited will exercise control of assets for certain types of cryptocurrencies, defined as the holding or control of assets belonging to, or on behalf of a customer, by a subject person acting in the course of rendering a VFA service under the Act, and includes custody of assets. A customer whose assets are held under the control of a subject person enjoys a right of ownership in such assets notwithstanding that they may be registered in the name and title of or are otherwise vested in the subject person. Where such assets are held by the subject person as part of a common pool of identical assets or are otherwise held in a clients’ or common account, the customer shall have an undivided share in the ownership of all the assets held collectively by the subject person in such a pool or account. The storage of cryptocurrencies as deposited by the users would be considered as a custodian service provided by Tokenomica Malta Limited which is also covered under the VFAA. Albeit a licensable activity in and of itself, the license issued under Class 4 of the VFAA also covers such a service. Certain requirements in relation to the safe-keeping thereof, the transfer between hot and cold wallets, and other functions are expected to be covered by the MFSA in the issuance of guidelines under the VFAA. Tokenomica Malta Limited will not be handling fiat currency deposits and/ or withdrawals directly, rather than through a partner financial institution.
Prior to admitting a VFA to trading on Tokenomica Malta Limited, the quality of the VFA must be assessed, taking several factors into account. These factors include:
- A technologically experienced development team of good repute;
- The issuer’s AML/CFT and cybersecurity systems;
- Availability of multi-signature wallet solutions;
- The determination in accordance with the FI Test and its endorsement;
- Protocol and underlying structure including the scalability of the blockchain amongst other factors;
- Consensus protocol;
- Systems’ auditor report on the Issuer’s Innovative Technology Arrangements;
- Developments in the markets in which the Issuer operates;
- The geographic distribution of the VFA and the relevant trading pairs;
- Reliability of the information included on the whitepaper;
- Whether the VFA has in-built anonymization;
- Whether the VFA was used with any smurfing technology or traded on Dark-net marketplaces;
- Whether the VFA is or has been traded on any sidechains;
- Whether the VFA has an inbuilt mechanism which caters for settlement failure such as resolution mechanisms;
- Other DLT exchanges on which the VFA is traded, if any;
- Social media information including official website.
All technical platforms handling the exchange of the relevant assets/instruments, as per current MFSA standards, would need to be approved by the applicable authority. Such approval would be part of the application process. It is quite likely that, due to the technical nature of the VFA Exchange in question, such approval may also need to be partly granted by the Malta Digital Innovation Authority.
Security Tokens Trading Platform
Security tokens trading platform is a trading facility that will provide its users with a possibility to trade with security tokens classified as financial instruments.
For these purposes, Tokenomica is in the process to obtain a Category 3 Investment Services license under Markets in Financial Instruments Directive (‘MiFID’) regime, which will be operated by a separate legal entity.
Under this license, entities are allowed to perform investment activities that are listed below:
- Execution and transmission of clients orders: this function will be performed when a client will place an order to acquire or sell security tokens.
- Dealing on own account: STTP may acquire security tokens directly from the issuers or its clients for its own account, as well as engage in margin trading.
- Portfolio management and investment advice: STTP may be engaged by the clients to manage the portfolios of security tokens, or provide analytics and market research for investment purposes.
- Underwriting of financial instruments and/or placing of financial instruments: this service can be requested by the projects that are issuing their security tokens with the use of Tokenomica’s Security Tokens Issue Platform, described on the previous slides.
- The following Ancillary Services should be covered:
- Safekeeping and administration of financial instruments, including custodianship and related services: in order to facilitate its main activities, STTP may have to safekeep and keep custody of assets of its clients.
- Granting credit to one or more financial instruments, where the firm granting the credit is involved in the transaction.
- Foreign exchange services where these are connected to the provision of investment services.
- Investment research and financial analysis or other forms.
This license shall also allow to make use of a “Single Passport” regime enabling provision of Investment Services across all EU and solicit clients throughout the EU.