ESMA Reviews Malta’s CASP Licensing, Flags Gaps in Crypto Oversight

The European securities and Markets Authority conducted a peer review to evaluate Malta’s oversight of crypto asset service providers amid changing EU regulations. The review examined Malta’s authorisation process, governance frameworks, anti-money laundering measures, and supervision after authorisation.

While Malta’s financial authority demonstrated sufficient resources and expertise, the report raised concerns about at least one case where a provider was authorised despite unresolved issues. These included enforcement actions, weak governance, and insufficient assessment of business risks, IT systems, and anti-money laundering controls.

Importance of Authorisation and Cross-Border Supervision

The report highlights that authorisation is a key tool for managing risk and ensuring compliance. Since many CASPs operate cross-border, strong and consistent supervision is necessary. National regulators must rely on each other’s oversight to support a unified capital market.

🔎 A peer review analysing @MFSAComm approach to authorising #CryptoAsset Service Providers under #MiCA:✅ Good supervisory engagement and resources💡 Areas for improvement related to the assessment of authorisations were identifiedhttps://t.co/dBy1J12NnQ pic.twitter.com/O4OuYz78WE

Supervisory Gaps and Recommendations

Post-authorisation actions by the MFSA were generally appropriate, though some issues should have been addressed earlier. ESMA recommended that the MFSA revisit unresolved risks and strengthen its evaluations of growth plans, IT resilience, and group governance.

For all EU regulators, ESMA called for better information sharing and attention to risks such as unregulated DeFi activity, custody operations, and user-facing interfaces. Clear risk warnings and cross-border cooperation were also encouraged.

You may find it interesting at FinanceMagnates.com: Forex Brokers May Cut Costs as ESMA Seeks Input on Overlapping EU Financial Reporting.

Positive Practices and MFSA’s Response

The report noted some good practices by the MFSA, such as hiring crypto-specialised staff and engaging with the industry. The MFSA welcomed the findings and committed to making improvements, citing its prior experience in crypto regulation.

Malta Licenses Major Crypto Exchanges

Several well-known cryptocurrency exchanges, including Crypto.com, OKX, Gate.io, and Gemini, hold licenses issued by the MFSA. These licenses allow them to operate under Malta’s regulatory framework for virtual financial assets. The MFSA is responsible for ensuring that these companies comply with relevant laws and regulations.