The recently adopted MiCA (Markets in Crypto-Assets) regulation introducing a mandatory pan-European licensing regime for all Crypto-Asset Service Providers (CASP) and requirements for crypto issuers, is going to overrule all national crypto regulations by the end of 2024. A single MiCA license will allow CASPs to provide their services in the European Union and European Economic Area (EU/EEA) without additional national limitations.
However, until then, national requirements for Virtual Asset Service Provider (VASP) authorizations will remain effective.
Pre-MiCA – National EU/EEA Virtual Asset Service Provider (VASP) Authorizations
Generally, there are 2 main types of VASP authorizations currently available on a national level:
Cryptocurrency exchange operator, providing FIAT-to-Crypto, Crypto-to-FIAT and Crypto-to-Crypto exchange services; and
Cryptocurrency depository wallet operator, providing crypto-asset custody services and management of the clients’ crypto-asset depository wallets
Some jurisdictions have additional requirements for VASPs:
Requirements in crypto issuance and public offers (ICO, IEO etc.)
Company incorporation and local presence
Minimum share capital
Employment of local AML officer/MLRO
Bank/EMI account for crypto activities
Client onboarding, KYC, and AML reporting requirements
Regulatory reporting and company maintenance costs
Pre-MiCA – National EU/EEA VASP Authorizations – Things to Consider
Until MiCA is fully implemented, all EU/EEA countries will have separate national crypto regulations with unique advantages.
For example, Poland could appear as an attractive jurisdiction because there are no additional capital requirements. However, it lacks a supportive FinTech environment granting access to banking services for crypto companies.
Lithuania is an attractive crypto jurisdiction because it has one the largest FinTech environments in the EU and a wide selection of licensed crypto-friendly financial institutions offering bank/EMI accounts for crypto companies.
This is why the world’s biggest crypto exchange Binance, secured a Lithuanian VASP authorization for crypto exchange and wallet services in mid-2020 with ECOVIS’ support, leveraging our expertise throughout the process. However, once MiCA is fully implemented all crypto regulation standards will be harmonized across the EU and crypto companies will no longer be able to use regulatory arbitrage to sidestep crypto requirements in the EU.
Markets in Crypto-Assets Regulation (MiCA)
The MiCA regulation is the EU’s response to the national crypto regulation arbitrage and the need to fundamentally harmonize the European crypto regulation. The biggest benefit of MiCA’s legal harmonization is that when a crypto company authorised under MiCA in one EU country will be allowed to provide services across the entire EU/EEA without any additional national licensing.
In general, the MiCA regulation will regulate the activities of crypto-asset issuers and crypto-asset service providers (CASPs). The definition of VASPs is redefined as CASPs, but they mean the same thing.
Crypto-asset issuers are essentially divided into two main groups – stablecoin issuers and non-stablecoin issuers. MiCA identifies 2 types of stablecoins Asset-Referenced Tokens (ART) and Electronic Money Tokens (EMT). EMT token issuance is limited to Credit and Electronic Money Institutions, but there is no licensing process, the institutions only need to notify the national regulator by providing certain documentation e.g. a white paper.
In regard to crypto-asset service providers, the MiCA regulation identifies 10 different CASP services, ranging from crypto-asset administration and operation of a trading platform to crypto-related investment consultations and portfolio management. CASPs will have to go through a licensing process comparable to a financial institution’s licensing. All CASPs will have to adhere to general MiCA requirements and to additional service-specific requirements.
The regulation is quite insightful to crypto use cases, thus, it includes a whole array of different exemptions and exceptions that do not overburden startup-sized ventures with unnecessary requirements.
In short, the MiCA regulation is a great leap forward for the EU’s crypto regulation because it provides uncompromised legal certainty for crypto companies, thereby increasing the confidence of crypto investors and it enables crypto companies to provide their services across the EU/EEA without limitations. There’s no doubt that the MiCA regulation provides a clear advantage to first-movers that wish to provide their crypto services across the EU and be the first ones to establish themselves in the market.
You can find more information about the MiCA regulation in our MiCA overview mini-series “MiCA at a glance”.
ECOVIS ProventusLaw – Crypto Consultations Before and After MiCA’s Implementation
ECOVIS is a leading global consulting firm uniting 11,000+ professionals operating in more than 90 countries worldwide. This allows ECOVIS to use its network to serve clients in all major jurisdictions and propose the best licensing solutions based on the Clients needs. The most notable advantage of ECOVIS is its ability to provide personal advice at a local level and leverage its international and interdisciplinary expertise across a wide network of professionals.
ECOVIS ProventusLaw based in Lithuania is currently the most experienced Virtual Asset Service Provider authorization advisor in the network. We have authorized more than 25 crypto companies for European business including some of the world’s biggest crypto exchanges like Binance and Robinhood.
ECOVIS ProventusLaw provides a full set of crypto-asset services, including VASP authorization services before the implementation of MiCA and CASP licensing and crypto-asset issuance services after MiCA is implemented.
In pre-MiCA VASP authorization, ECOVIS provides company registration, and preparation of all required AML/KYC policies and procedures. After the authorization process, ECOVIS provides tax advice, bookkeeping, and compliance services for authorized entities. ECOVIS also consults in opening bank and electronic money accounts for crypto companies.
ECOVIS ProventusLaw also provides full-spectrum consultations in preparation for the MiCA regulation and legal advice on the actual licensing process for obtaining a MiCA authorization. In particular, we provide:
An initial review of a Company’s activities and their coherence to the MiCA regulation
particularly important for DeFi;
A gap analysis of CASP activities’ compliance to MiCA
Designed for currently active CASPs to identify MiCA compliance deficiencies and compile a workable MiCA authorization roadmap;
Ideal for new or currently active CASPs wishing to obtain a MiCA license;
Credit and Electronic Money Institutions for Electronic Money Token (EMT) stablecoin issuance;
Licensed and non-licensed entities for Asset-Referenced Token (ART) stablecoin issuance;
MiCA authorization documentation consultation
White paper drafting/amendment;
Legal opinion for ART issuers;
Policies and procedures;
Program of operations;
Read more about the MiCA’s implementation and our crypto services by clicking here.