WH Partners: Malta must act now on tokenisation and DeFi or risk losing lead
WH Partners has responded to MFSA consultations on tokenisation and DeFi, urging Malta to move quickly to maintain its position as a digital assets hub.
Law firm WH Partners has submitted detailed responses to two MFSA consultations on tokenisation and decentralised finance, arguing that Malta must act quickly or risk losing its competitive edge in digital assets.
Malta was the first EU country to pass the VFA Act in 2018, attracting investment, skilled workers, and licensing activity. The European Commission is now reviewing MiCA, and no EU member state has yet developed a comprehensive plan for DeFi. WH Partners says the window for Malta to lead will narrow once Brussels makes a decision.
On tokenisation, the firm recommends that the first pilot focus on units of existing real estate funds rather than tokenising land directly. The proposal is a three-phase approach: a single income-generating property fund open to retail investors, a multi-property portfolio for wider EU distribution, and eventually a secondary market for tokenised units. The aim is to allow small investments in professionally managed, MFSA-supervised funds, furthering financial inclusion.
Most barriers to tokenisation are interpretative, not statutory, according to WH Partners. The MFSA does not need new primary legislation. It should confirm that Token Registries can serve as records of beneficial ownership within existing structures, that DLT-based transfer orders receive settlement finality protections, and that smart contract terms are enforceable. The firm points to the UAE and Luxembourg as models to follow, while avoiding the size caps and eligibility restrictions of the EU's DLT Pilot Regime.
On DeFi, WH Partners puts forward four proposals. The first is a two-part test to define decentralisation, distinguishing systems with a responsible person from those without. The firm recommends that Malta publish this framework before ESMA does. The second proposal is a DeFi-specific extension of Malta's Segregated Cell Company legislation, which is among the most advanced in the world.
The MFSA should clarify that voluntary adoption of an SCC does not constitute evidence of centralisation for MiCA purposes.
The third proposal is an enabling, opt-in legislative framework for software-based organisations, including DAOs. WH Partners says Malta can be the first EU jurisdiction to provide a credible legal home for these structures, attracting operators currently in legal grey areas offshore. The fourth proposal is guidance-led engagement rather than sandboxes, which the firm says risk creating a two-tier market and signalling uncertainty.
The response underlines the commercial stakes. If Malta acts decisively, it can set the standard for the EU and maintain its reputation as a digital assets hub. If it hesitates, it risks losing the early mover advantage that has defined its success in the sector.