Crypto in Malta: Complete Guide (2024

Key Takeaways

• Definition of cryptocurrencies: Maltese law identifies four types of digital assets: coins, financial tokens, hybrid tokens, and utility tokens.
• Crypto taxes: capital gains tax on crypto earnings range from 15% to 35%, depending on the residential status of the taxpayer. 
• Strategies for avoiding taxes: In Malta, long-term crypto gains are not subject to taxation. 

Cryptocurrency Laws in Malta

Ever since the popularity of crypto spiked in 2017, Malta has become a leading pioneer in this area. 

In fact, this self-titled “Blockchain Island” was one of the first places on Earth to introduce clear legislation to regulate this innovative technology. 

The key laws regulating their activities in this region, include the:

• Virtual Financial Assets Act (VFAA). Implemented in 2018, this act defines a regulatory framework for digital assets. It gives clear guidance for blockchain-based fundraising processes, such as ICOs, and specifies requirements for businesses involved in crypto-related activities.
• Innovative Technology Arrangements and Services Act (ITAS): This legislative initiative specifies the legal status of blockchain businesses. It defines how to treat smart contracts, blockchain records, digital signatures, and other aspects of blockchain technology.
• Malta Digital Innovation Authority Act (MDIA): This act establishes the Malta Digital Innovation Authority, which grants certificates to crypto platforms and auditors. Thus, it aims to prevent fraudulent activities and ensures that the industry follows regulatory standards.
• Prevention of Money Laundering Act: Established in 1994, this law has not lost its relevance in regulating AML/CFT aspects of financial activities. To stay up-to-date with the new technologies, the local authorities complemented it in 2018 with a set of regulations known as the Prevention of Money Laundering and the Financing of Terrorism.

Cryptocurrency regulation in Malta is designed to clearly provide solid guidelines on taxation and other legal questions to anyone who wishes to get involved with crypto.

As a result, many innovative startups flood into the region, boosting its economy and contributing to the growth of the industry.

International Standards for Crypto Regulation

In 2023, the European Commission released Markets in Crypto Assets (MiCA). This is a new regulatory framework that guides the regulation of digital assets and related services within the European Union.

The new set of laws promotes better transparency and governance while providing consumers with higher protection.

As a member of the EU, Malta is obliged to follow this framework as well. Yet, its local laws (the aforementioned VFAA, in particular) already have a lot in common with MiCA. In fact, they are both based on the Markets in Financial Instruments Directive (MiFID).

Therefore, one should not expect any radical changes in the local regulation of crypto once these international rules come into force.

How Does the Law Define Crypto in Malta?

According to the rules of crypto regulation in Malta, digital assets fall into four key categories: financial tokens, coins, utility tokens, and hybrid tokens. 

Here’s what the law says about them:

• Coins: As an equivalent of fiat currencies, these assets are designed to be used for payment purposes, as a medium of exchange, or simply as a store of value.
• Financial tokens: Also known as security tokens, these digital assets bear characteristics akin to equities, shares, derivatives, and other similar financial instruments. They provide their owners with voting rights, as well as potential earnings in the form of dividends and other types of interest payments.
• Utility tokens: These are tokens that do not hold any characteristic of security. Thus, they can only be used in exchange for goods and services on a specific platform.
• Hybrid tokens: These tokens hold the features of both security and utility tokens and can be used accordingly.

Whether or not each of the assets is subject to taxation is determined by the nature of the assets, the purposes they are used for, the specifics of each transaction, and a few other key factors.

How Do Crypto Taxes Work In Malta?

Typically, the gains that a business or an individual obtains in the form of crypto are subject to capital gain tax. 

In Malta, this tax usually ranges between 15% and 35%, depending on the taxpayer's residential status.

In addition, you will pay more or less in taxes based on the crypto-related activities that you engage in. According to the local regulatory framework, these are:

1. Trading: Individuals or businesses that frequently conduct short-term transactions to gain profits from fluctuating prices are defined as traders. The amount of tax they owe depends on how often they perform these activities, as well as how large the sums of these transactions are.
2. Investing: Those who hold crypto for a long period of time are considered investors. The regulatory oversight is usually applied to them with lower frequency. The amount of tax that an investor owes is determined individually.
3. Mining: This type of activity is considered a legitimate business in Malta. Thus, it is subject to taxes based on the scale of the mining operations.

What about a more common crypto-related activity, like investing? 

Well, the good news is that long-term crypto holders in Malta pay no taxes on their crypto earnings.

This aspect of crypto regulation in Malta is a big part of what makes the region so attractive to crypto proponents.

How to Start a Crypto Business in Malta

Though the regulatory framework for crypto companies in Malta is designed quite well, registering a fully-licensed entity is still a challenge due to some strict requirements.

Below, we have listed the basic steps that one should take to start a crypto business in this region:

1. Reserve a unique company name.
2. Rent office space to obtain a legal address. Note that, in Malta, you may use a virtual office for these purposes.
3. Open an account with a local bank and deposit the initial share capital. Its minimum size starts from EUR 1,164 for private companies and at least EUR 46,587 for public ones.
4. Pay a fee to the Registrar of Companies. The size of the fee varies between EUR 245 and EUR 1,750 depending on the size of the share capital.
5. Collect the necessary documents, such as proof of a registered office address, proof of the transferred share capital, notarized copies of shareholders’ passports, and other relevant paperwork.
6. Apply for a VFA (Virtual Financial Asset) provider license from the Malta Financial Service Authority.

It’s important to note that you may only submit an application through a registered VFA agent. The list of these agents is available on the MFSA’s Financial Services Register.

How to Register a White Paper in Malta

A person or an entity wishing to receive a VFA license in Malta must prepare an official white paper and register it with the MFSA. The document must be written in English and comply with the requirements specified by the authorities.

Once the document is ready, the selected VFA agent submits an application and confirms the compliance of the white paper to the Ministry of Foreign Affairs.

In the application, one must provide the following details:

• Information about the applicant and the VFA agent.
• VFA details and the white paper details.
• Fees and declaration.

• Organizational structure.
• Information about the company founders.
• Other details specified in Section 3 of the official guidelines.

Once a white paper is registered by the authorities, it remains valid for 6 months.

FAQ

How much are crypto taxes in Malta?

Profits obtained from crypto trading, investing, or mining in Malta may be subject to capital gain tax. This ranges between 15% and 35%, depending on the taxpayer's residential status. However, long-term crypto investments are tax-free.

Who regulates crypto in Malta?

The Malta Financial Service Authority (MFSA) is the key governmental structure tasked with managing the safety and compliance of the crypto ecosystem in Malta.

Which bank is crypto-friendly in Malta?

Paytah and Agribank are two banks in Malta that are widely considered to be crypto-friendly. Agribank is the financial entity for the agricultural sector, and enables its customers to buy bitcoin and other crypto easily from their bank accounts.

How to buy cryptocurrencies in Malta

Some of the most popular methods of purchasing crypto in Malta include SEPA, bank transfer, PayPal, Wise, and Revolut.

Is Malta crypto-friendly?

Malta has dubbed itself the “Blockchain Island,” and the country was quick to adopt forward-thinking crypto regulation designed to attract both businesses and traders. As of 2024, Malta might just be one of the most crypto-friendly countries on the planet.