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Financial Services Licensing
MK Fintech Partners is a specialised regulatory consultancy focused on fintech, crypto, and investment services, operating under the Michael Kyprianou Group, a globally recognised Top Tier law firm acknowledged by Legal 500 and Global Law Experts. Our core proposition is bridging the legal and technological gap for clients operating in complex, fast-evolving regulatory environments.
Financial Services in Malta
Discovering the Benefits of Malta: The Rise of a Fintech Hub
Malta is one of the European Union’s most established jurisdictions for the licensing and operation of payment institutions (PIs) and electronic money institutions (EMIs), offering a regulatory framework fully aligned with PSD2 and the Electronic Money Directive. For operators seeking EU authorisation, Malta provides a compelling gateway: a single licence grants access to the entire EEA through passporting rights, while the Malta Financial Services Authority (MFSA) is recognised for its accessibility, structured application process, and constructive engagement with applicants. The jurisdiction’s appeal is reinforced by a competitive cost base relative to larger EU financial centres, a deep professional services ecosystem experienced in payments regulation, and a favourable corporate tax framework making it an efficient and credible base from which to build and scale a European payments or e-money business.
At MK Fintech Partners, we advise PIs and EMIs through every stage of the regulatory lifecycle from initial structuring and MFSA licence applications through to safeguarding arrangements, agent and distributor passporting, AML/CFT compliance, and ongoing regulatory correspondence drawing on our hands-on experience with Malta’s licensing process to deliver practical, commercially aware guidance from the outset.
E-Money Institutions
Section 1
Definition of E-Money
The Act defines e-money as:
“Electronically, including magnetically, stored monetary value as represented by a claim on the issuer which is issued on receipt of funds for the purpose of making payment transactions and which is accepted by a natural or legal person other than the financial institutions that issued the electronic money.”
Permissible Activities of E-Money Institutions
- The provision of payment services listed in paragraph 2 of the Second Schedule
- The granting of credit related to payment services referred to in paragraph 2(d) and (e) of the Second Schedule, where the conditions laid down in paragraph 3(d) are met
- The provision of operational services and closely related ancillary services in respect of the issuing of electronic money or to the provision of payment services
- The operation of payment systems as defined in the second schedule
- Business activities other than the issuance of electronic money, having regard to the applicable law regulating such activities
Other Permissible Payment Services
- Services enabling cash to be placed on a payment account as well as all the operations required for operating a payment account
- Services enabling cash withdrawals from a payment account as well as all the operations required for operating a payment account
- Execution of payment transactions, including transfers of funds on a payment account:
– Execution of direct debits, including one-off direct debits
– Execution of payment transactions through a payment card or a similar device
– Execution of credit transfers, including standing orders - Execution of payment transactions where the funds are covered by a credit line:
– Execution of direct debits, including one-off direct debits
– Execution of payment transactions through a payment card or a similar device
– Execution of credit transfers, including standing orders - Issuing of payment instruments and/or acquiring of payment instruments
- Money remittance
- Payment initiation services
- Account information services
Licence Under MiCA
Discovering the Benefits of Malta: The Rise of a Fintech Hub
Malta was the first country in the world to draft and pass legislation regulating the cryptocurrencies space. Malta’s robust framework has been used and emulated by the EU in their Markets in Crypto-Assets Regulation (MiCA), published in June 2023.
Under MiCA, regulated EMIs will also be authorised (through an exemption) to engage in:
▸ Custody of crypto-assets on behalf of third parties
▸ Provision of transfer services for crypto-assets on behalf of third parties specifically related to the e-money tokens it issues
To qualify for this exemption, licensed entities must notify the relevant regulatory authority at least 40 days before commencing such services for the first time.
Application Process - E-Money Institutions
Preparatory and Licence Application
Phase 1
- Prior to submitting an application, the MFSA advises promoters to arrange a preliminary meeting with their representatives to discuss their proposal. The applicant must submit a comprehensive written description of the proposed activity before the meeting.
- The next stage involves the submission of an application form and the necessary supporting documentation by the promoters.
- The MFSA will review the application and supporting documents, and provide feedback in the form of “Comments Letters”. Fit and proper checks will also begin at this stage.
Licensing: Approval in Principle
Phase 2
- After reviewing the draft application and supporting documents, the Director of the Authorisation Unit will assess if the business proposal and due diligence meet the applicable regulations.
- Once approved by the Supervision Council, the MFSA will grant its ‘in principle’ approval for the issuance of the licence.
- At this point, the Applicant must finalise any outstanding matters, such as company incorporation and submission of signed copies of the revised Application Form.
- The licence will be issued once all pre-licensing matters have been resolved.
Post-Licensing / Pre-Commencement of Business
Phase 3
- The MFSA may require the Applicant to fulfil certain post-licensing obligations before starting its business operations.
- Once the MFSA is satisfied that all obligations have been met, the Applicant is permitted to commence its operations.
Shared Regulatory Requirements
Section 3
Fit and Proper Test
Before granting approval,The MFSA must be satisfied that qualifying shareholders (≥10% direct or indirect holdings) and persons effectively directing the business are of good repute, competent, and suitable. All relevant individuals (shareholders, directors, senior management, key function holders) must submit a personal questionnaire and supporting due diligence documentation.
Board of Directors and Management
The “four eyes” principle requires at least two suitably experienced and reputable individuals to effectively manage the institution, who need not necessarily be directors. The board’s size and composition are determined by the nature, scale, and complexity of the business in consultation with the MFSA, and should include non-executive (including independent) directors where appropriate to provide effective oversight and challenge management.
Safeguarding Customers' Funds
Client funds must be segregated from the institution’s own funds and protected as a separate patrimony, particularly in insolvency scenarios. Alternatively, safeguarding may be achieved via an insurance policy or comparable guarantee if required by the MFSA. Such funds are not deposits and cannot be used for the institution’s own activities.
Own Capital
- To obtain a licence, the applicant must meet the minimum initial capital requirement of €350,000 (for EMIs). Requirements for Payment Institutions range from €20,000 to €125,000, depending on the specific payment services provided (e.g., money remittance, payment initiation, account information).
- The licensed Institution must maintain its own funds above the greater of: (a) the required initial capital amount; OR (b) 2% of the average outstanding electronic money.
Reporting Requirements
Institutions are subject to ongoing reporting obligations, including periodic (quarterly or monthly) submissions and MFSA inspections. Audited annual financial statements must be submitted within four months of year-end, alongside any additional group reporting required. Separate accounts must be maintained for E-Money issuance and payment services, as well as other activities.
Passporting Rights
A licensed Institution in Malta, or one with an equivalent authorisation, is allowed to offer its services in other EU/EEA nations under the Malta licence, provided that it notifies the appropriate authorities in the target nations.