Regulator launches public consultation on tokenisation

The Malta Financial Services Authority (MFSA) has taken another important step in its commitment to support tokenisation of financial instruments and real-world assets. It has now reached the public consultation phase on this important step which is aimed at integrating distributed ledger technology (DLT) within Malta’s financial services framework.

Tokenisation was described by the European Central Bank as a way to use technology to “transform wholesale markets by offering new, improved ways to settle financial transactions”.

Malta’s initiative is taking shape in tandem with international developments, with the EU having recently launched its DLT Pilot Regime while other capital market jurisdictions around the globe are considering its adoption.

Ian Meli, the Head of Investment Services Supervision at the MFSA said that the Authority is cognisant that tokenisation offers potential benefits such as enhanced transparency and operational market efficiencies.

“Tokenisation enhances efficiency across the issuance, trading, and post-trade processing. The use of permissioned distributed ledger technology (DLT) can support near real-time processing and facilitating the role of transfer agents, thereby reducing operational risk,” he said.

This is a game-changer as it enables activities such as trading, settlements, and record-keeping of investments to take place through digital platforms.

Tokenisation can also improve transparency and auditability through the maintenance of a shared, time-stamped transaction records that are accessible to authorised participants within a controlled network environment, subject to appropriate governance and data protection. Naturally, the set-up needs to be supported by robust governance arrangements.

“By complementing existing regulatory frameworks, including those under MiFID and AIFMD, and taking into account the broader EU digital finance framework, including MiCA where relevant, tokenisation can reinforce Malta’s positioning as a forward-looking financial centre that remains responsive to technological developments,” he added.

Making capital markets more attractive

Tokenisation aligns closely with Malta’s objective of enhancing the competitiveness and attractiveness of its capital markets. It has the potential to digitalise existing processes by shortening the settlement cycle. In addition, it could also improve the accessibility of capital markets to retail investors who are in a position to hold wallets.

Increasing reliance on technology, on the other hand, exposes investors to cyber risk, especially in relation to safekeeping of tokenised assets, he said, pointing out that this could be mitigated through proper diligence and safekeeping tokens through whitelisted wallets.

At the same time, tokenisation introduces new considerations such as custody challenges, including those that might arise from the use of self-custody wallets.

The consultation process hence seeks stakeholder feedback on operational challenges, regulatory considerations, infrastructure needs, and potential use cases that could support the responsible development of tokenised financial markets in Malta.

In parallel, the Authority has also examined more specific applications, such as the potential use of tokenised fund units within permissioned DLT environments and in collateral contexts.

“Taken together, this work reflects a structured approach aimed at better understanding the implications of tokenisation across different areas, while ensuring that any developments take place within a controlled framework that preserves legal certainty,” Mr Meli explained.

Getting it right first time

One of the most important aspects, especially for the MFSA, is that the new framework would be robust from a customer-protection and market integrity perspective, meaning that it wants to ensure that the right infrastructure, legal, and regulatory considerations are in place before it starts to operate.

The Authority is adopting a measured approach, with a view to ensuring that any regulatory framework remains proportionate and aligned with existing requirements. This includes ongoing engagement with stakeholders through consultation process, as well as continued assessment of emerging developments and practical implementation considerations.

The public consultation, which continues until 30 June 2026, will seek to assess whether tokenised financial instruments would comply with existing EU legislative frameworks, or whether additional guidance, national measures, or future EU regulatory developments may be required.

Submissions should be sent via email to [email protected].