MiCA Regulation — All you should know

The MiCA regulation has established a unanimous law to govern and regulate crypto assets. The regulation will clarify the crypto asset definition and categorize the types – utility, asset-referenced tokens (ART), and e-money tokens (EMT) – based on the risk factors it entails.

For example, e-money and asset-referenced tokens will require higher capital and manage liquidity by specific standards.

In essence, the regulation concerns two types of entities: Crypto Asset Service Providers (CASPs) and Virtual Asset Service Providers (VASPs) – both of which need the MICA license to continue operating.

The crypto-asset services covered under the regulation are;

• Crypto-asset custody and administration managing funds on behalf of their clients.
• Crypto trading platforms allow the buying and selling of crypto-assets.
• Crypto exchange platforms allow crypto to fiat swaps.
• Consulting platforms advising on crypto-related matters.

How MiCA affects the crypto asset providers in the EEA

Crypto exchange wallet platforms allowing the buying and selling of cryptocurrencies will have to diversify their investments from coins listings/orders to beefing up their compliance team to meet the regulation requirements — meaning businesses will have to shell out an additional budget for the license on top of an already expensive listing/orders budget.

On the positive side, the passporting rights will allow businesses to serve clients across EEA countries, enabling them to expand on their business.

Crypto fiat onramp providers will face a double challenge. First, to continue operating in the EEA, they must get a MiCA license. Second, as per MiCAR, stablecoins will now be regulated as Electronic Money Institutions (EMI) and providers will require licensing to legally issue fiat stablecoins.

This puts a damper on the onramp and offramp platforms who might have to delist stablecoins as obtaining an EMI license isn’t as straightforward and requires a minimum initial capital of at least €350,000.

Crypto cards issuing will have to comply with the regulation to continue issuing cards in the EEA costing them a high price to maintain the cards program. In addition to card programs being expensive and time-consuming, businesses will now have to work on improving their compliance and spend a fortune on securing the license.

So what’s the next step?

There are two possible ways forward for CASPs. One, register as a legal European entity and apply for the MiCA license.

If CASPs do decide to get the license, the passporting rights will guarantee businesses to continue serving clients across the EU once approved in a member state. To get approved, businesses must ensure their governance and internal compliance procedures are in perfect order.

Two, and a much simpler way would be to team up with MiCA-licensed companies that already have the compliance and industry know-how. As VASP-licensed crypto banking as a service provider gear up for MiCAR, European crypto businesses will find it easier to navigate the regulatory maze and continue with their operations efficiently.

Two, and a much simpler way would be to team up with MiCA-licensed companies that already have the compliance and industry know-how. As VASP-licensed crypto banking#mce_temp_url# as a service provider gears up for MiCAR, European crypto businesses will find it easier to navigate the regulatory maze and continue with their operations efficiently.