Step aside Howey Test, here comes the Financial Instrument Test!

Following the Malta Financial Services Authority's (MFSA) consultation process the Authority has published a trial version of the financial instrument test which shall be carried out by issuers of Initial Coin Offerings (ICOs) prior to the offering of DLT assets to the public in or from within Malta and by persons providing any service and/or performing any activity, within the context of either the Virtual Financial Assets Act or investment services legislation.

The test shall take place by means of an interactive excel sheet which transposes the various steps of the test disclosed in the MFSA's consultation paper. Following input by the users, the test will determine the licensing regime (or exemption thereof) applicable to the DLT asset and provide a clear indication of the way forward by taking into account the main features and characteristics of the asset in question.

The purpose of the Financial Instrument Test is to determine the classification of a DLT asset as either:

[i] Electronic Money as defined in the Third Schedule to the Financial Institutions Act;

[ii] a Financial Instrument as defined in the Second Schedule to the Investment Services Act;

[iii] a Virtual Financial Asset defined in the Virtual Financial Assets Act; or

[iv] a Virtual Token as defined in the Virtual Financial Assets Act.

Industry stakeholders have been invited to test such a system by the authority and raise any questions by the 13th August, 2018.