Search for a law firm
March, 12 2019
March, 8 2019
Malta Gaming Authority launches VFA/DLT Sandbox Environment
The first phase of the Malta Gaming Authority’s (MGA) sandbox environment was launched on 1 January 2019, for the purpose of accepting virtual financial assets (‘VFA’) and virtual tokens as valid consideration for the participation in licensed games. This test environment, which is intended to attract innovative business models, allowing them to develop in a contained regulatory environment, is expected to remain operative for a minimum period of ten months and can be extended at the discretion of the MGA.
The second stage of the regulatory sandbox, which will see the use of innovative technology arrangements such as “smart contracts” (contemplated by the Innovative Technology Arrangements and Services Act (ITAS Act) is expected to be launched at a later date.
The main features of this first stage of the regulatory sandbox can be summarised as follows:
- Participation within the sandbox framework is subject to the MGA’s approval and will only be granted to operators holding an MGA licence. It will also be subject to the satisfaction of any other requirements that may be applicable in terms of the VFA Act or any other laws or regulations. Applications may be submitted through the MGA’s online portal.
- Operators approved to participate in the framework will have the obligation to ensure that players depositing value in virtual currencies (VC) complete a formal verification process within 30 days of the first deposit. Wallet addresses also need to be verified by the licensee in order to ensure that the player is the legitimate owner of that wallet.
- Deposits of virtual currencies should be applied solely for the placement of wagers and any withdrawals effected by the player are to be paid out in the same virtual currency. Such currencies cannot be exchanged or transferred within the licensee’s gaming platform, as doing so would cause the gaming operator (licensee) to effectively perform the functions of a VFA exchange, which is licensable under a separate regulatory framework.
- Operators are obliged to add a player-specified ceiling for VFAs, distinct from the fiat currency limit. Operators cannot accept deposits in VFAs by a player in excess of the equivalent of €1,000 per month, throughout the duration of the sandbox, which is to apply at operator level, rather than under any specific brand operated by that operator.
- Anti-money laundering (AML) rules and regulations and the Implementing Procedures issued by the FIAU in relation to AML in the gaming sector remain applicable to virtual currencies as they would in the case of regular money-based games. Customer due diligence is to be carried out in accordance with the Implementing Procedures and, for the purpose of the risk-based approach, VFAs and virtual tokens are to be treated as a “high risk” funding methods.
In its second phase, the sandbox framework is expected to be extended to applications for the use of Innovative Technology Arrangements (‘ITA’) within the key technical equipment of licensees, to coincide with the establishment of the Malta Digital Innovation Authority (MDIA) in 2018.
These long-awaited developments serve to provide a temporary regulatory framework for the testing of this development, enabling the MGA to develop empirical live information about the use of virtual currencies within an online gaming environment as a basis for a proper assessment of the associated risks and the development of long-term solutions, if such payment methods are indeed retained.