Malta Gaming Authority’s New Sandbox Framework Welcomes Cryptocurrencies

Jan 26, 2023 Artyom Ustinov
Malta Gaming Authority (MGA) is embracing the rapid changes and developments in fintech by releasing an extension to the so-called “Sandbox Regulatory Framework”, which deals with the acceptance of Virtual Financial Assets (VFA) and virtual tokens and the use of innovative technology arrangements.
This legislation governs the use of cryptocurrencies as payment for all operators licensed by MGA, together with the adoption of novelty blockchain technology such as Distributed Ledger Technology (DLT), including but not limited to gaming platforms based on DLT and smart contracts. The policy was due to come into force on 31 December 2022. However, due to overwhelmingly positive feedback on the proposed framework, the MGA decided to extend the invitation for further applications to 28 February 2023.

First Phase of Sandbox Framework for Accepting Cryptos

The Malta Gaming Authority announced its plans to work on a legal framework for allowing operators to accept cryptocurrency payments back in 2018. The regulator rolled out the first phase of the Sandbox Framework on 1 January 2019. As part of the phase, which was expected to last ten months, operators submitted their applications directly to the regulator or via third-party providers. Both new and existing operators applied for approval to use DLT Assets through the designated section — New or Change in Payment Methods / Financial Management Information. The licensees were mandated to report any failed transactions, invalid deposits, and VFA player liabilities through their monthly reports on player funds. The implementation of cryptocurrency payments was conditional on the applicant's existing MGA license and complete acceptance of all financial rules and restrictions imposed by law. Over the next two years, the MGA published several amendments to the Sandbox Framework, such as changing the criteria for VFAs and clarifying how operators can be granted approval to participate in the Sandbox Framework.

Second Phase of Sandbox Framework Implementation

The second phase of the Sandbox Framework focused on implementing Innovative Technology Arrangements (ITAs) and Distributed Ledger Technologies (DLTs), such as smart contracts, and using blockchain platforms in the gaming systems. Before an operator could use an ITA, its core technical equipment had to be accredited by the Malta Digital Innovation Authority (MDIA), compliant with the Innovative Technology Arrangements and Services Act (Chapter 592 of the Laws of Malta). Before approving a DLT Asset, the MGA had to perform a Financial Instrument Test (FIT) to ensure all provisions of the law were satisfied. The regulator also noted that it would consider only games or components hosted partially or entirely in a DLT environment. Also, all player funds and wagers would be held in escrow until the minimum requirements for a transaction were satisfied.

Future of Virtual Assets in the Maltese Jurisdiction

Malta Gaming Authority’s policy of acceptance of cryptocurrencies and digital assets as a means of payment has already made its licensees far more attractive to players. It gives them a sense of greater security and privacy, which are becoming increasingly important in society today. The regulator’s plans to be at the forefront of change in the industry will pay dividends in the future, especially now that the European Parliament has reached a provisional agreement on regulating crypto-assets at the EU level under the Markets in Crypto Assets (MiCA) proposal. MiCA aims to ensure that digital assets fall under the scope of current financial regulations, thus paving the way for the gaming sector to offer crypto payments. The MGA Sandbox Framework is nearly identical to MiCA, so complete alignment can be expected with only a few minor adjustments.
Artyom Ustinov

Artyom is Head of White Label & Turnkey Solutions and has been working in complex B2B/B2C sales, as well as business development and management consulting in iGaming for more than 18 years.

Together with the Key Account Management Team, he has helped over 100 start-ups and experienced gaming companies to launch their projects with SoftGamings.

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