EUROPEAN CRYPTO LICENSE.
MARKETS IN CRYPTO-ASSETS
REGULATION – MICA

  • Crypto-asset issuance
  • Crypto-asset exchange listing
  • Stablecoin issuance
  • CASP authorization
  • Crypto exchanges
  • Crypto custody
  • Swaps
  • Marketplaces etc.

Existing European National Crypto Regulations and MiCA

Test The European Markets in Crypto-Assets (MiCA) Regulation has introduced a comprehensive, pan-European regulatory framework for crypto-assets. This includes a passportable Crypto-Asset Service Provider (CASP) license. During a transitional period, national Virtual Asset Service Provider (VASP) authorizations in EU member states may temporarily remain effective, with specific end dates varying by country.


Non-EU National VASP Authorization

Several non-EU countries offer national VASP authorizations covering Crypto Currency Exchange Operator and Crypto Currency Depository Wallet Operator authorizations. The specific type of authorization can vary depending by country. Some jurisdictions may demand separate authorizations for crypto-asset issuance (tokens/coins), Initial Coin Offerings (ICOs), Initial Exchange Offerings (IEOs), and other crypto-asset-related services.

National VASP authorizations can present a viable solution for smaller companies that may find the sophisticated CASP license under MiCA Regulation financially prohibitive. ECOVIS can advice selecting the right national VASP authorization depending on the services planned to be provided and business needs.


Lithuania: EU Hub for Crypto-Asset Service Providers

Lithuania has emerged as a leading European jurisdiction for crypto-asset service providers, building on its established reputation in traditional finance for payment and electronic money institutions. It was one of the first EU countries to offer a transparent and cost-effective VASP (Virtual Asset Service Provider) authorization to international crypto service providers.

By the time the Markets in Crypto-Assets (MiCA) Regulation came into force, over 370 VASP companies had registered in Lithuania. ECOVIS ProventusLaw assisted more than 30 companies getting their VASP authorization.


Key Players in Lithuania’s Crypto Landscape

In 2020, Binance, the world’s largest crypto exchange, secured its Lithuanian VASP authorization. ECOVIS ProventusLaw provided comprehensive support to Binance, including Lithuanian company incorporation, VASP authorization, HR, and compliance.

More recently, in May 2024, Robinhood Europe, UAB, a subsidiary of the US-listed broker Robinhood Markets, Inc. (NASDAQ: HOOD), was granted the first Lithuanian CASP license under the new MiCA Regulation. This license is EU passportable, enabling Robinhood to offer crypto-related services across the entire European Union and European Economic Area (EU/EEA). ECOVIS ProventusLaw has played important role in supporting Robinhood’s crypto operations in Europe since 2023, when Robinhood Europe, UAB was initially incorporated and registered as a VASP in Lithuania. The new EU passportable CASP license replaces the previous national VASP registration, significantly extending Robinhood’s reach across the EU without requiring additional licensing in other EU jurisdictions.

MiCA Implementation Roadmap

MiCA at a glance

Objectives

  • The MiCA regulation is intended to adapt the EU regulation for the digital age by enabling the use of innovative technologies in the future-ready economy
  • It is set out to level out and regulate the crypto-asset industry on an EU level without curbing the development of the underlying technology
  • The uniformity of EU rules will provide legal clarity in the industry in the EU and have a significant regulatory impact globally
  • A harmonized EU-wide legal system will impose its requirements to all crypto-asset industry actors within its scope
  • The regulation classifies market actors into crypto-asset issuers and crypto-asset service providers.

MiCA SCOPE MiCA

Crypto-assets non-stablecoin

  • Utility tokens
  • Crypto-assets
  • Stablecoins
  • NFTs, etc.

Crypto-Asset Issuers

  • Crypto-assets
  • Stablecoins

Crypto-Asset Service Providers

  • Exchanges
  • Wallet providers
  • Swaps
  • Payment facilitators etc.
The MiCA regulation applies to all crypto-assets and crypto market actors. Albeit, some are either completely exempted or may be exempted under certain conditions.

Exemptions and exceptions

  • NFTs – Non-fungible tokens are completely exempted;
  • Airdropped tokens – may be exempted under certain conditions;
  • Mining / staking rewards – may be exempted under certain conditions;
  • Utility tokens – may be exempted under certain conditions;

Key definitions

  • Issuers – issuers of crypto-assets. 2 basic types: stablecoins and non-stablecoins.
  • Stablecoin – a crypto-asset backed by other assets which maintain its stable value.
  • Non-stablecoin – crypto-asset whose value may fluctuate depending on the market conditions.
  • CASP – crypto asset service providers that provide one or multiple services prescribed by MiCA.
  • E-money tokens (EMTs) – stablecoins backed by FIAT currency, equated to e-money.
  • Asset Referenced Tokens (ARTs) – stablecoins backed by any assets, not equated by e-money.
  • Significant stablecoin – tokens that have a significant enough market presence to influence the financial market or prevent other issuers from issuing their stablecoins.

As the MiCA regulation is going to be rolled out in stages, the first stage is already in effect from 2023-07 with EU authorities already busy on compiling the necessary guidelines explaining the regulation’s implementation.

The first round of the regulation’s requirements rolling out on 2024-07-30 are going to affect stablecoin issuance; and the last stage in 2024-12-30 for the rest of crypto market actors. Accordingly, with less than a year left for the regulation to take effect the industry’s participants should take full advantage of the transitional period. This was reiterated by the EBA in their crypto market statement for stablecoin issuers.

Key takeaways

  • MiCA – implemented in stages
  • Possible exemptions and exceptions
  • EBA urges preparation during the transitional period
  • Classification of crypto-assets and market actors
  • 2 types of stablecoins – EMTs and ARTs
  • 10 different services for CASPs

To ensure a smooth transition, the crypto market participants should familiarize themselves with the current regulatory framework in their home member state which is still applicable during the transitional period, and use the requirements of the MiCA regulation as a blueprint for adjusting their arrangements in accordance to the upcoming regulatory regime.

Notwithstanding narrow exemptions, all crypto-asset issuers will have to prepare a white paper, including the information about:

  • The issuer;
  • The crypto-asset project;
  • The token;
  • The underlying technology including environmental effect;
  • The associated risks;

Stable coin issuance

MiCA identifies two types of stablecoins – E-money tokens (EMTs) and asset-referenced tokens (ARTs). Even though they both purport to do the same thing i.e. to maintain a stable value pegged to a FIAT currency, the difference is the possible issuers and the underlying assets backing up their value.

  • ARTs – can be issued by any entity, provided they are authorized to do so, and can be backed by any assets.
  • EMTs – can only be issued by credit or electronic money institutions, without the need to be separately authorized, and can be backed by the FIAT currency it’s pegged to.
  • Once authorized to issue stablecoins by a single EU regulator, the issuers will have the right of issuance across the EU.
  • Granting interest for holding stablecoins will be prohibited.
  • Both stablecoins can be considered “significant” if, among other things, their daily transaction
  • volumes and market capitalization exceeds a certain threshold.

As with most crypto activities, stablecoin issuance is heavily technology-dependent that’s why it’s important to set up not only a reliable future-resistant DLT infrastructure, but also one that is compliant and has the required tracking and reporting capabilities.

CASP authorization

The provision of any of the 10 crypto-asset services is subject to an authorization by the competent authorities of the home member state. The applicant entity has to be a legal person or an undertaking with a registered office in the member state where it aims to provide at least some of its activities. The information that needs to be provided during the application process and the prudential requirements will depend on the services that the authorization is sought for.

General requirements for CASP authorization:

  • Legal person, undertaking, other undertakings ensuring an equivalent level of protection as a legal person;
  • Registered office in EU member state of activity;
  • Effective management in the EU;
  • At least one of the directors resident in the EU;
  • Authorization valid across EU;
  • Different rules for already licensed entities;
  • Clear description of activities;
  • Sound governance arrangements;

Practice Areas

Crypto-asset issuance

Seeking to issue crypto-assets or have them listed on an exchange?

  • Company establishment
  • White paper
  • Airdrops
  • Crypto-asset classification

Stablecoin issuance

Planning to issue e-money or asset-referenced tokens?

  • White paper
  • Crypto-asset classification legal opinion
  • Policies
  • Governance

Crypto-asset service providers

Seeking to provide crypto-asset services?

  • Authorization
  • DeFi operations
  • Governance
  • Prudential requirements

Crypto currency exchange license

Contact person