Author: Joseph F. Borg

A Virtual Financial Asset (VFA) is defined by the law as being any form of digital medium recordation that is used as a digital medium of exchange, unit of account, or store of value and that is not electronic money, a financial instrument or a virtual token.

Therefore, the only way to ascertain what a VFA is, one needs to ensure that the coin or token is not one of the categories mentioned above. To make our life easier, the MFSA published an interactive test that allows persons to easily determine whether the VFA in question is a VFA or otherwise. The procedure within the test is the elimination, one by one, of electronic money, financial instruments and virtual tokens.

A coin or a token cannot be electronic money if any one of the below three elements is not present:

– Issued and redeemed at par value

– Raise a claim against the issuer’s assets

– Used for the purpose of a payment transaction

It cannot be a virtual token if:

– The token standard allows it to be converted into another Decentralised Ledger Technology (DLT) asset type

– If the token can be subject to atomic swapping

– If it is intended by the issuer to list it or admit it to trading

– If its purpose is not solely to be used for the acquisition of goods or services

Furthermore, it cannot be a financial instrument if it is a medium of exchange or an instrument of payment to initiate or conclude one or more transactions to buy goods or services as agreed between two parties or more.

It is interesting to note that even if an issuer of a token grants the right to the token holder of any future distribution of profits, it does not mean that the token is tantamount to a security in of this test.

This article does not constitute legal advice and does not establish an attorney relationship. If you require legal advice, please contact me on or one of my colleagues who helped me with this article and with all blockchain related work at WH Partners at