MiCA: Upcoming EU-Wide Crypto Regulation. What You Need to Know?

The recently adopted MiCA (Markets in Crypto-Assets) regulation is going to overrule all national crypto regulations by the end of 2024.

The MiCA regulation introduces a mandatory pan-European licensing regime for all Crypto-Asset Service Providers (CASP) and specific requirements for crypto-asset issuers. Luckily, a single MiCA CASP license will allow CASPs to provide their crypto services across the entire European Union and European Economic Area (EU/EEA) without additional national limitations.

However, until MiCA’s full implementation at the end of 2024, 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 crypto-asset issuance and offer to the public (ICO, IEO etc.). In addition, VASPs are subject to the supervision of national Anti-Money Laundering authorities and/or financial regulators. Some other notable considerations are:

Company incorporation and registered share capital requirements
Local presence requirements in the country of registration and employment of local AML officer/MLRO
Possibility of a bank/EMI account opening for the company
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 have different national crypto regulations that crypto companies seek to leverage to their advantage.

For example, Poland could appear as an attractive jurisdiction for VASP authorization because it does not impose additional capital requirements. However, what it effectively lacks is a supportive FinTech environment allowing the necessary access to banking services for crypto companies.

Lithuania, on the other hand, is an attractive crypto jurisdiction because it has one the largest FinTech environment in the EU and a big selection of licensed crypto-friendly financial institutions offering bank/EMI accounts for crypto companies.

This is why the world’s biggest crypto exchange Binance, with the help of ECOVIS, holds a Lithuanian VASP authorization for crypto exchange and cryptocurrency depository wallet services since the middle of 2020. Binance chose ECOVIS for its experience and expertise in advising Binance during the entire incorporation and VASP authorization process.

Notably, however, after the full implementation of the MiCA regulation at the end of the 2024, this jurisdictional arbitrage is going to disappear because the MiCA regulation will harmonize the crypto regulations across the EU/EEA. Therefore, even though crypto companies authorized as VASPs in Poland (or anywhere else in the EU) are currently not subject to additional capital or other requirements, they will nonetheless have to comply with all MiCA’s requirements once it is fully implemented at the end of 2024. And in terms of capital requirements, they may reach up to €150k depending on the precise services.

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.

Regarding 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 11000+ professionals operating in more than 90 countries around the world. 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 assists in opening bank and electronic money accounts for crypto companies.

ECOVIS ProventusLaw also provides all consultation services in preparation for the MiCA regulation. In particular, we provide a gap analysis service for currently active CASPs that helps identify what the company needs to improve to be MiCA compliant. We also help companies adjust their white papers to MiCA requirements and we provide a full CASP license document preparation from policies and procedures to governance arrangements and programs of operation.

Read more about the MiCA’s implementation and our crypto services by clicking on this link.