Second Reading in Parliament for Blockchain Bills: The Innovative Technology Arrangements and Services Act

One of three recent and significant legislative developments in the field of blockchain and Distributed Ledger Technology ('DLT') was presented by the Maltese Government for its second reading in Parliament . The Bill is aimed at promulgating a framework for "Innovative Technology Arrangements and Services" ('ITAS'). The ITAS Bill is intended to go hand in hand with the also newly publicised Malta Digital Innovation Authority Act (the 'MDIA Act', an overview of which may be accessed here ) and the Virtual Financial Assets Act (the 'VFAA', an overview of which may be accessed here and here ).

The first and second schedules of the ITAS Bill establish the definitional criteria for innovative technology arrangements ('ITA') and innovative technology services ('ITS') respectively. The Bill provides that an arrangement or service having the characteristics of an ITA or ITS is eligible to be recognised as such by the Malta Digital Innovation Authority (the 'Authority'), subject to the Authority's written ruling on eligibility. Whilst the Authority is afforded substantial decision-making powers in this regard, a decision in relation to an application for the recognition of an ITA or ITS shall be subject to review or appeal by the Tribunal under the provisions of the MDIA Act.

The ITAS Act will allow for the registration of persons providing innovative technology services ('ITS providers') on any ITAs. Once registered, the service provider will be granted a certificate of registration which will contain certain relevant information including, inter alia, identification details and the classes of services which the applicant has been registered to provide. This certificate is to be made accessible to all users of the ITA since it is intended to increase transparency, certainty and confidence with regards to certified ITAs. Applicants who are not ordinarily resident in Malta must appoint a resident agent (prior to registration) who is habitually resident in Malta.

The Authority shall maintain an electronic register containing details of the different types of recognition granted to applicants, as well as the necessary information required to identify applicants and the activities they are authorised to carry out. The Authority may also certify an ITA for one or more specified purposes under the ITAS Act when it is satisfied that the relative requirements imposed by the law have been fulfilled.

Most interestingly, ITS providers registered under the provisions of the Act will be considered professionals who act as fiduciaries in relation to the information submitted to them by any customers and shall also be bound by the provisions of the Professional Secrecy Act. These new obligations will almost surely be appreciated by potential investors since they are strengthening the legislative framework within which ITAs and ITSs operate by increasing accountability and confidentiality. The law, as proposed, would also introduce a number of guiding principles regarding the behaviour of ITS providers in the course of their operations.

By introducing the abovementioned registration and certification procedures, as well as expressly laying out the definitional criteria for ITAs and ITSs, the ITAS Act is instilling much appreciated confidence in potential investors' minds. Legislative developments of this kind serve to considerably strengthen the legal regime in this sector.