New requirements for all European VASPs – MiCA a Comprehensive Overview
As the landscape of the cryptocurrency market continues to evolve, regulatory frameworks must adapt to ensure consumer protection and market stability. The recently enforced Markets in Crypto-assets (MiCA) regulation, a pan-European framework, has brought about significant changes in the crypto-asset sector. Its impact is set to subject market participants, particularly Virtual Asset Service Providers (VASPs) or Crypto Asset Service Providers (CASPs), to a more robust and unified regulatory environment. At Complium, we understand the importance of staying compliant with these new requirements. To facilitate a seamless transition for our customers, we have compiled a comprehensive overview of the MiCA regulation and its implications for businesses operating in the European Union.
The recently enforced Markets in Crypto-assets (MiCA) regulation, a pan-European framework, has brought about significant changes in the crypto-asset sector.
The MiCA framework, which came into effect in June 2023, aims to provide legal assurance for crypto assets not previously governed by the existing EU financial services legal framework. It applies to natural and legal persons, as well as other undertakings engaged in the issuance, offer to the public, trading of crypto-assets, or providing services related to crypto-assets within the EU. The regulation divides crypto assets into three categories, namely Asset-referenced tokens, E-money-tokens, and Other crypto assets, including utility tokens.
Exclusions and Inclusions:
MiCA doesn’t apply to crypto assets already regulated by existing EU frameworks, including financial instruments, funds, deposits, insurance products, and more. Additionally, non-fungible and unique tokens (NFTs) are largely excluded, except in cases where ownership is fractionalized. Competent authorities are tasked with defining tokens as non-fungible and unique based on their de facto features rather than their issuer designation.
Regulation for CASPs (formerly known as VASP):
MiCA lays down specific regulations for CASPs providing various crypto-asset services. These services include custody and administration, trading platform operations, order execution, advice on crypto assets, and more. CASPs must fulfill general obligations such as obtaining authorization from a competent EU authority, meeting minimum share capital requirements, acting in the best interest of clients, safeguarding clients’ assets and funds, and implementing robust policies for AML, data security, and complaints handling.
Key Requirements for CASPs under MiCA:
- Authorization from an EU member state’s competent authority
- Minimum share capital requirements as follows:
- EUR 50,000 for order management
- EUR 125,000 for asset custody
- EUR 150,000 for a trading platform
- Prudential safeguards equal to minimum share capital or one-quarter of the previous year’s fixed overheads
- Honest, fair, and professional conduct in the interest of clients
- Secure safekeeping of clients’ assets and funds
- Maintaining a knowledgeable and reputable management team
- Implementation of comprehensive policies for AML, service continuity, and data security
- Effective conflict of interest prevention measures
- Planning for an orderly wind-down of activities without causing undue economic harm to clients
- Requirement for at least one EU-resident director
MiCA is a binding legislative act applicable across all EU countries. While it is automatically binding, its implementation may necessitate adjustments in national legislation and actions by national authorities or regulatory bodies. At Complium, we are committed to ensuring a smooth transition for your business in accordance with the new requirements and rules set forth by MiCA. For any inquiries or discussions regarding this topic, please reach out to your designated Complium contact person. We are dedicated to supporting your business in its compliance journey and beyond.