MALTA Law and Practice Contributed by: Ian Gauci and Cherise Abela Grech, GTG Legal
different rules will apply in the case of fully decentralised protocols. 10.10Regulation of Funds Collective investment schemes wishing to invest in crypto-assets do not require an additional licence for this purpose, although funds are expected to comply with some crypto-asset- specific supplementary conditions on an ongo - ing basis. At the time of writing, only profes - sional investor funds (PIFs) and notified PIFs are permitted to invest in crypto-assets. Nev - ertheless, it should be noted that the MFSA has been considering whether to permit alternative investment funds (AIFs) and notified alternative investment funds (NAIFs) to invest in crypto- assets by extending the supplementary condi - tions that apply to PIFs to cover AIFs and NAIFs. 10.11Virtual Currencies See 2.2 Regulatory Regimes . 10.12Non-Fungible Tokens (NFTs) Much like the VFA Framework, MiCA does not provide a specific definition of an NFT. It defines the concept of “crypto-asset” as “a digital rep- resentation of a value or a right which may be transferred and stored electronically, using dis- tributed ledger technology or similar technol- ogy” . According to this definition, it would be reasonable to say that NFTs are captured within MiCA. However, MiCA goes on to exclude the following types of crypto-assets from its scope: • crypto-assets that are unique and not fungi - ble with other crypto-assets, including digital art and collectibles, whose value is attributa - ble to each crypto-asset’s unique characteris - tics and the utility it gives to the token holder;
• crypto-assets that represent assets or rights that are unique and not fungible; and • crypto-assets representing services or physi - cal assets that are unique and not fungible, such as product guarantees or real estate – this exclusion is on the basis that these crypto-assets are not readily interchangeable and the relative value of one crypto-asset in relation to another, each being unique, cannot be ascertained by means of comparison to an existing market or equivalent asset. Despite this exemption being clearly set out, it is important to note that MiCA does not exclude NFTs from its scope altogether, and indeed the following types of crypto-assets fall within the scope of MiCA: • fractional NFTs – ie, the fractional parts of an NFT are not considered to be unique and non-fungible in and of themselves; • NFTs issued in a large series or collection – the terms “large series” and “collection” are not defined; • crypto-assets whose sole non-fungible ele - ment is a unique identifier; and • crypto-assets that appear unique and not fungible but whose de facto features linked to de facto uses would make them either fungi - ble or not unique – this assessment needs to be undertaken on the basis of substance over form. Undertaking a legal classification assessment of every crypto-asset is thus essential to determine whether or not it falls within MiCA’s scope.
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