The Cryptocurrency race on! comparing leaders in DLT Regulation

The Cryptocurrency Race Is On! Comparing Leaders in DLT Regulation

It seems like cryptocurrencies and blockchain technology are all anyone can talk about. Regulators have realised that disruptive technologies hold vast potential, but few have taken up the initiative to create a regulatory framework within which FinTech businesses can operate. Countries are classifying cryptocurrencies as assets, commodities and even as currencies – there is no one view that prevails. This article will explore how jurisdictions at the forefront of DLT regulation are moving forward in this race among regulators.


Malta has recently released a consultation document which unveiled the plans to draft three bills to regulate Initial Coin Offerings (“ICOs”), virtual currencies and technology service providers. Through the enactment of these laws, the Malta Digital Innovation Authority (MDIA) will be created which shall be responsible for certifying technology arrangements and Technology Service Providers (“TSPs”). The Maltese Financial Services Authority (“MFSA”) has issued consultation documents with respect to the regulation of companies offering services in relation to virtual currencies and the Distributed Ledger Technology (DLT). If the framework becomes law, one may voluntarily ask for certification of a technology arrangement, giving flexibility and certainty. The proposed Virtual Currencies Bill will set out the rules applicable for ICOs which will be tested to determine their viability in the light of consumer protection laws, and whether a virtual currency can be considered as a financial instrument or as an asset under the new law.


Home to break-through technologies such as Skype, Estonia is one of the most tech-savvy European nations, however, to date, its plans for future DLT-legislation are limited. An Estonian government agency proposed the creation of the ‘estcoin’ token, which may be used to exchange goods and services in and out of Estonia, essentially blurring the boundaries between a currency and a token. European Central Bank (ECB) President Mario Draghi turned it down, stating that no Eurozone member state may introduce its own currency. Interestingly, ECB spokesperson Peter Ehrlich pointed out that, should the project be undertaken through a public-private partnership, the private element would place it outside the ECB’s jurisdiction.



Gibraltar’s Financial Services Commission promulgated a concise legal act which provides for the use of DLT to store data or to transmit value. The act regulates cryptocurrency exchanges, investment services and other controlled technological financial offers. The value-based regulations promote investor interest, resource maintenance, risk management, client asset protection, corporate governance, secure system protocols, financial crime prevention and liquidation contingency plans.


The Israeli Tax Authority (ITA) shed light on the taxation of cryptocurrency. It was reported that cryptocurrencies shall be subject to a 25% capital gains tax in the case of private investors, while a 47% rate for businesses applies. Companies trading in cryptocurrencies will be subject to a 17% VAT. Investors would need to report on their holdings and arrange prepayment of tax. Private investors will be exempt, since cryptocurrencies are classified as intangible assets. Interestingly, miners will be classified as dealers for VAT purposes.


The Swiss Financial Market Supervisory Authority (FINMA) has issued guidelines regarding the application of securities, anti-money laundering, and data protection regulations to ICOs, which will be regulated on a case-by-case basis. Different types of tokens will receive different treatments, depending on whether they are used as:

Payment – not subject to securities law, but to anti-money laundering regulations (“AML regulations”);

Asset – subject to securities law and AML regulations;

Utility – not subject to AML or securities law if they are not investments and they only provide access rights to non-financial blockchain;

Hybrid tokens.

United States

The federal government has not restricted states – nor has it afforded protection to consumers. Some states have not formed an opinion on cryptocurrencies and blockchain, others have embraced them, and others have outright discouraged their use. The Uniform Law Commission brought together legal professionals to draft the Virtual Currency Businesses Act, for the consideration and eventual adoption by state legislatures. If adopted, it will not apply to entities with less than $5,000 in virtual currencies on an annual basis, but to companies specifically controlling clients’ virtual currency. Unfortunately, no state has yet adopted this proposed framework.

What's next?

These technologies are no longer foreign concepts, but instruments which are increasingly becoming part of our reality and which one day may very well facilitate our everyday life as they continue to become more common place. It is only a matter of time before every jurisdiction will need consider how it will regulate them. The way such technology will fit into the traditional legal framework will cause some disruption until the dust settles, however, Malta is excitingly looking to embrace and lead in such developments.


By Nicholas Warren & Sarah Vassallo. Nicholas Warren is Senior Manager, Financial Services and