MICA to RegRally: The Crypto Guide, February 2025

ECOVIS ProventusLaw brings you a curated selection of significant developments from the European crypto regulatory landscape. It provides viewers with a look at what’s ahead and high-profile insights into the ever-changing crypto industry.

EU market access with MiCA licensing: The time to act is now

As of December 30, 2024, MiCA has established a unified framework, providing both opportunities and challenges for crypto-asset service providers. MiCA introduces consistent regulatory requirements across all EU member states, replacing fragmented national frameworks. This EU-wide approach simplifies compliance and eliminates legal uncertainty, allowing CASPs to scale their operations across borders seamlessly.

Lietuvos Bankas emphasises early and well-prepared applications in Lithuania, focusing on maintaining high compliance standards.

As of January 2, 2025, Latvijas Banka, the central bank of Latvia, is also accepting applications for MiCA licenses.

Read more about the different licensing opportunities in Lithuania and Latvia, a strong destination for businesses seeking MiCA licenses:

EBA and ESMA Report: DeFi and Crypto Lending Pose Risks but No Immediate Stability Threats

The European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) have released a joint report on crypto-assets, focusing on decentralised finance (DeFi), lending, borrowing, and staking. The report, supporting the European Commission’s MiCAR assessment, finds that:

DeFi remains a niche in the EU but carries risks like money laundering and security vulnerabilities.
Crypto lending and staking have low EU adoption, with risks including excessive leverage and information asymmetries.
No immediate financial stability risks have been identified, but regulators will continue monitoring developments.

ESMA Reinforces Compliance Timeline for Stablecoins Under MiCA

The European Securities and Markets Authority (ESMA) has issued a formal statement on compliance requirements for Asset-Referenced Tokens (ARTs) and E-Money Tokens (EMTs), commonly known as stablecoins, under the MiCA Regulation.

Key points include:

CASPs must comply with MiCA Titles III and IV as clarified by the European Commission’s Q&A.
National regulators (NCAs) will enforce compliance for non-compliant stablecoins no later than Q1 2025.
The goal is regulatory coordination across the EU to prevent market disruptions.

ESMA urges CASPs to assess their offerings, implement governance and risk management measures, and work closely with regulators to ensure a smooth transition.

ESMA Pushes for Stronger Conflict-of-Interest Rules for CASPs Under MiCA

The European Securities and Markets Authority (ESMA) has issued its Opinion on new conflict-of-interest rules for Crypto-Asset Service Providers (CASPs) under the MiCA Regulation. The proposed measures aim to strengthen investor protection and ensure greater market integrity.

Key recommendations include:

Tighter controls on personal transactions to prevent significant conflicts of interest.
Broader conflict assessments beyond MiCA-regulated activities, covering all contractual arrangements.
Stronger resource commitments, requiring CASPs to allocate sufficient human, financial, and technological resources to compliance.
Structural segregation requirements when existing policies are insufficient to mitigate risks.

ESMA Issues Supervisory Briefing on CASP Authorisation Under MiCA

On January 31, 2025, the European Securities and Markets Authority (ESMA) released a Supervisory Briefing to guide National Competent Authorities (NCAs) in authorising Crypto-Asset Service Providers (CASPs) under the Markets in Crypto-Assets (MiCA) Regulation.

Key Requirements for CASPs

Governance and Compliance: Strict requirements apply regardless of CASP size, with heightened scrutiny for those managing over one million users or €3 billion in assets.
Physical Presence: CASPs must establish genuine decision-making power within the EU, with at least one executive physically based in the licensing country. Remote leadership is prohibited, and CEOs must be fully dedicated to their role.
Outsourcing Restrictions: Key functions such as risk management, compliance, and AML are subject to stringent outsourcing limitations, and sub-outsourcing is extensively supervised.
Regulatory Review of Business Models: CASPs offering multiple services or issuing proprietary tokens will undergo additional scrutiny.
Financial Projections: CASPs must provide stress-tested financial projections for three years and notify regulators 40 days before launching services.
Regulatory History: Past infractions, even outside the EU, will be thoroughly examined, requiring CASPs to demonstrate corrective actions.

EBA Proposes Standardized Capital Requirements for Crypto-Assets Under CRR 3

The European Banking Authority (EBA) has launched a consultation on draft Regulatory Technical Standards (RTS) to standardise how institutions calculate and aggregate crypto-asset exposures under the Capital Requirements Regulation (CRR 3). The proposed framework ensures consistency across the EU and aligns with Basel standards.

Key elements of the RTS include:

Defining capital treatment for EMTs, ARTs, and unbacked crypto-assets like Bitcoin.
Addressing credit risk, counterparty credit risk, market risk, and valuation adjustments for crypto-assets.
Establishing rules for netting, position aggregation, and hedge recognition to ensure accurate risk assessment.
Fair-valued crypto-assets are required to comply with prudent valuation under CRR 3.

To influence the final regulatory framework, stakeholders are encouraged to participate in the public hearing on 4 March 2025 and submit feedback by 8 April 2025.