MiCA Licensing

MiCA applies to crypto-asset service providers (CASPs), encompassing many entities within the cryptocurrency ecosystem. It includes:

• Custodial wallets
• Crypto-to-crypto and crypto-to-fiat exchanges
• Crypto-trading platforms
• Crypto-asset advising firms
• Portfolio managers

The regulation categorizes crypto-assets into several types, notably asset-referenced tokens, e-money tokens, and utility tokens.

Critical Aspects of MiCA Regulation

1. Unification of Licensing Process: MiCA streamlines the licensing process across the EU, allowing CASPs authorized in one member state to operate throughout the EU. It reduces the administrative burden and fosters a more integrated market.
2. Enhanced CASP Obligations and Disclosures: CASPs must have an EU-based office and adhere to detailed policies, including Anti-Money Laundering (AML) and data security protocols. Transparency in marketing, pricing, and fees is also emphasized.
3. Regulations on Token Issuance: Issuers of crypto-assets must publish a whitepaper and ensure operational adherence. The regulation bans algorithmic stablecoins and mandates strict compliance for fiat-backed stablecoins, including maintaining a liquid reserve.
4. Environmental Considerations: Addressing the environmental concerns associated with cryptocurrency operations, MiCA sets guidelines to minimize energy consumption and electronic waste from mining activities.
5. Market Abuse Prevention: Provisions to prevent market manipulation and other unfair practices are included to maintain a fair and transparent market environment.

MiCA categorizes crypto assets into three main groups:

1. Asset-Referenced Tokens (ARTs): These are not e-money tokens and maintain a stable value by referencing other values or rights, like official currencies. They could be widely adopted for value transfer or exchange. ART issuers must be established in the EU, and their whitepapers require approval by national competent authorities. ARTs may lose value, not always transferable or liquid and holders have a redemption right​​.
2. E-Money Tokens (EMTs): EMTs aim to maintain a stable value by referencing one official currency. They are digital alternatives to banknotes and coins, primarily for payment. EMTs must fulfill several criteria, including being electronically stored, representing a claim on the issuer, and being accepted by persons other than the issuer. EMT issuers must be authorized credit or electronic money institutions and publish a crypto-asset whitepaper​​.
3. Other Crypto Assets: This category includes all other crypto assets that don’t fall into ARTs or EMTs, such as utility tokens. These crypto assets are intended to provide access to a good or service supplied by the issuer. Issuers of these crypto assets don’t require authorization but must publish a white paper and notify the relevant authority before offering these assets to the public​​.

Significant ARTs and EMTs, based on volume and frequency metrics, will face specific provisions and additional regulatory burdens​​.

• Under MiCA, the issuance and offering of crypto-assets in the EU are subject to specific regulations to ensure transparency, investor protection, and market stability. Here’s a detailed look at these requirements:

Issuing Crypto-Assets in the EU

• White Paper Requirement: Issuers of crypto-assets must publish a detailed white paper before offering any crypto-assets to the public or seeking admission on a trading platform. This white paper must contain comprehensive information about the crypto-asset, including its features, the rights it confers, the project behind it, the terms of the offer, and associated risks.
• Conduct Rules Compliance: Issuers must comply with rules emphasizing honesty, fairness, and professionalism. It includes the obligation to act in the best interests of investors and the market.
• EU Legal Entity Requirement: For asset-referenced tokens and e-money tokens, there is a specific requirement that the offeror must be a legal entity established within the EU. This requirement aims to ensure higher oversight and regulatory compliance for these types of tokens.

Stablecoins and E-Money Tokens

• • Prior Authorization: Issuers of asset-referenced tokens (commonly known as stablecoins) must obtain prior authorization from a Member State’s National Competent Authority (NCA).
  • White Paper Approval: The relevant NCA must approve the white paper for asset-referenced tokens. It ensures that all the necessary information is disclosed and meets regulatory standards.
  • Regulatory Compliance: E-money token issuers must comply with sectoral legislation relevant to their operations. It includes adherence to regulations governing electronic money and financial services.
  • Financial and Operational Requirements: Issuers of stablecoins and e-money tokens must demonstrate compliance with bespoke own funds requirements and governance arrangements. They are also required to hold reserves of assets, ensuring solid financial backing for the tokens issued.

• MiCA includes various crypto-asset-related services which may be provided by the Crypto-asset service providers (CASP):
  1. Class 1
     1. reception and transmission of orders on behalf of third parties; and/or
     2. providing advice on crypto-assets; and/or
     3. execution of orders on behalf of third parties; and/or
     4. placing of crypto-assets.
  2. Class 2
     1. custody and administration of crypto-assets on behalf of third parties.
  3. Class 3
     1. exchange of crypto-assets for fiat currency that is legal tender;
     2. exchange of crypto-assets for other crypto-assets;
     3. operation of a trading platform for crypto-assets.

Accordingly, the requirements for Crypto-asset service providers (CASP) set up in MiCA will depend on the Class of services to be provided. For example, the minimum size of the authorized capital of Class 1 – EUR 50,000, Class 2 – EUR 125,000 or Class 3 – EUR 150,000.

1. prepare internal documents related to the Crypto-asset service providers (CASP) activity, such as:
   1. the programme of operations;
   2. description of crypto-asset service provider’s governance arrangements;
   3. descriptions of the internal control mechanism;
   4. risk assessment procedure and business continuity plan;
   5. descriptions of IT systems and security measures;
   6. procedures to handle complaints from clients, etc.
2. provision of general information (criminal records, source of funds, etc.) of all natural persons who, directly or indirectly, hold 20% or more of the share capital or voting rights of Crypto-asset service provider (CASP);
3. requirement to appoint exclusively qualified and experienced key management persons;
4. use adequate, proportionate resources and procedures, including resilient and secure information and communication technology (ICT) systems;
5. Safekeeping clients’ funds by immediately depositing funds in a central bank or credit institution;
6. ensure proper oursourcing of operational functions related to crypto-asset services;
7. General requirements of custody and administration of crypto-assets; etc.

1. Phase 1: Due DiligenceTimeframe: Approximately 5-10 working daysKey Actions:
   • Analysis of business model: indication of type and scope of crypto related services to be provided, including main requirements applicable
   • Legal Framework Compliance: review of available internal documentation, including control mechanisms, policies and procedures, other documents required for MiCA license
   • Indication of documents to be prepared: preparation of list of documents, which shall be drafted for the successful submission of CASP license application
   • Third party selection: assistance in selecting 3^rd party service providers for IT solutions, compliance, KYC, etc.

   Phase 2: Preparation stage & Collection of Documents

   Timeframe: Around 4-8 weeks

   Key Actions:

   • Business plan: preparation of comprehensive business plan together with the financial forecasts, which will be in compliance with the Supervisory Body requirements (organizational structure, marketing plan, SWOT analysis, etc.)
   • Preparation of application documents: preparing application documents, including drafting of mandatory policies and procedures, filling-in required annexes, adjustment of documents, which are already in place;
   • Strategic Recruitment: Hire key personnel, including such as Compliance / AML Officer, ensure that strong and competent management team is place
   • Collection of documents: gathering required documents for the application process related to the shareholders and key management persons of the applicant (corporate documents, criminal records, source of funds, etc.)
   • Physical Office Setup: secure an office location within the EU to meet operational and regulatory expectations for a CASP, ensuring a tangible presence within the European Union.

   Phase 3: Licensing Application

   Timeframe: 3-5 months

   Key Actions:

   • Application for issuance of license: provision of prepared application documents to the Supervisory body, including supporting documents
   • Initial approval: within 25 business days Supervisory body issues approval whether all required documents were provided
   • Questions & Answers: Supervisory body provides questions regarding provided application documents, engage proactively with the authority throughout the review process, responding promptly to any requests for additional information

   Phase 4: Operational Setup and Final Approvals

   Timeframe: 2-4 weeks (following approval)

   Key Actions:

   • Financial Partnerships: assess and establish partnerships with banks and financial institutions within the EU that are open to working with regulated CASPs, facilitating operational banking needs.
   • Implementation of Compliance Systems: finalize the implementation of compliance, risk management, and operational systems in line with MiCA requirements, ensuring readiness for inspection or audit by the regulatory authority.
   • Regulatory Approval and Final Steps: Upon receiving the license, complete any final steps as required by the Supervisory Body, which may include providing additional documentation or demonstrating operational readiness through a soft launch or pilot phase.

1. Establishment of organizational structure – assistance identifying the appropriate legal structure, incorporation of holding companies in tax efficient jurisdictions, transferring companies shares, designing ownership structure, etc.;
2. Tax advisory – guidance and advice regarding tax obligations and liabilities, minimizing tax liabilities from cross-border activities, creating a tax planning strategy, etc.;
3. Preparation of internal documentation – preparation of tailor made AML / CTF Policy with Annexes, Terms & Conditions, Privacy Policy, Cyber Security Policy, etc.;
4. Assistance in hiring employees – guidance and support to employers who are looking to hire new staff. Such service includes potential employees background / knowledge check, interviewing, establishment of employment policies and procedures, etc.;
5. Assistance in creating partnerships – support and advisory in various potential partnerships and collaborations with other entities in terms of additional services (e. g., IT, KYC, banking service providers) or additional financing (e. g., organizing meetings with VC, agnel investors, preparation of pitch deck, etc.);
6. Legal support in other crypto related projects – assistance in token offering legal support (ICO/STO/IEO), private placement rounds, preparation of legal opinions, analysis of business models, etc.

For more please see our Services page.