The authorities of Malta have submitted a test that will clearly determine when a token issued through ICO is considered a security. This is reported by CoinDesk.
The Financial Services Authority of Malta published a consultation document and now accepts public comments on its contents. The document describes the so-called Financial Instrument Test, which would ultimately become part of its proposed Virtual Financial Asset Act (VFAA).
The agency reported that the methodology of the test is based on a discussion of a previous document published in November 2017, when this idea was presented for the first time.
The test includes 3 stages, which first of all will determine whether an asset based on distributed registry technology (DLT) can be classified as "virtual tokens" or utility-tokens that are not securities.
Virtual token is a DLT asset which has no utility, value or application outside of the DLT platform on which it was issued and that cannot be exchanged for funds on such platform or with the issuer of such DLT asset.
The Financial Services Authority of Malta proposal document
Tokens that belong to this category will not be regulated by the law "On virtual financial assets".
Assets that are traded on the secondary market will pass to the second stage of testing, where the token will be checked for compliance with various definitions of the security in European legislation, including tradable securities, money market instruments or financial derivatives.
If it turns out that the token corresponds to the definition of one of these assets, it will be regulated in accordance with the EU directive "On the markets of financial instruments".
A negative result in the second stage will allow the token to be admitted to the third stage of testing, at which the issue of token regulation will be decided in accordance with the Law on Virtual Financial Assets. At this stage, both the pan-European and the national criteria of Malta will be presented.
Proposed to cover all ICOs organized in Malta, the paper is currently open for public input until May 5, the agency said.