MiCA regulation for crypto asset service provider (CASP)

Crypto Asset Service Providers (CASPs) play a key role in the digital asset ecosystem. The European Union’s Markets in Crypto-Assets (MiCA) Regulation sets out clear rules for the operation of such organisations, which aims to create a safe, transparent and stable environment for all market participants.

CASPs provide a wide range of services, including custody of cryptoassets, cryptocurrency exchanges, token issuance, management of cryptoasset trading platforms and counselling. CASPs are regulated to protect the interests of users, prevent financial crime and ensure the stability of the financial system.

MiCA introduces the following key requirements for CASP providers:

1. Licensing and registration: All CASPs are required to obtain authorisation to operate from the national regulator. In order to do so, they must demonstrate compliance with established requirements, including adequate operational infrastructure and experienced management.
2. Transparency and disclosure: CASPs are required to provide users with full and accurate information about their services, the risks associated with the use of cryptoassets, and the terms of service.
3. Protecting customer assets: Robust measures must be implemented to protect customers’ crypto assets, including the use of advanced storage technologies, such as cold wallets, and internal control systems.
4. Countering financial crime: CASPs are required to comply with anti-money laundering (AML) and countering the financing of terrorism (CFT) regulations, including conducting customer due diligence (KYC) and monitoring transactions.
5. Risk Management: Suppliers shall implement risk management systems to minimise operational, technological and market risks that may affect their business.
6. Regular reporting: CASPs are required to provide national and European regulators with regular reports on their activities, including data on financial sustainability, operational performance and security incidents.

MiCA regulations provide legal clarity for CASPs, which helps to build trust among users and investors. In addition, the regulatory framework helps prevent potential systemic risks associated with the rapid development of the cryptoasset market.

The benefits of implementing MiCA for CASPs include improved reputation, access to new markets within the European Union and reduced regulatory risk. However, compliance with the regulation requires significant investment in technology, internal processes and staff training.

MiCA also introduces strict measures for large CASPs that have significant market power. Such entities are subject to enhanced regulatory oversight to minimise the risks of market concentration and abuse.

The MiCA regulation for CASPs is an important step towards creating a stable and sustainable cryptoasset market in Europe. With clear rules and high standards of protection, CASPs are able to develop in an environment of legal certainty, fostering innovation and digital transformation of the financial sector.

What is crypto asset service provider (CASP)?

A Crypto Asset Service Provider (CASP) is an organisation or business that provides a wide range of services related to digital assets such as cryptocurrencies, tokens and other types of virtual assets. A CASP plays a key role in the digital asset ecosystem by providing users with access to services such as storing, trading, exchanging and managing cryptoassets.

CASP’s main functions include:

1. Crypto Asset Storage. CASP provides storage services to ensure the security of users’ digital assets. This may include the use of cold wallets and other technologies to prevent unauthorised access.
2. Cryptoasset Exchange. CASP performs transactions to exchange cryptocurrencies for fiat money or other crypto-assets, providing users with convenient access to the market.
3. Trading platforms. CASPs may provide cryptoasset trading platforms where users can buy, sell or exchange digital assets.
4. Counselling and asset management. Some CASPs provide professional digital asset portfolio management and investment counselling services to users.

CASPs are key to the development of the cryptoasset market, but their activities present a number of challenges. An important aspect of their work is compliance with regulatory requirements aimed at protecting users and preventing financial crime.

The basic requirements for CASP include:

1. Compliance with AML/CFT standards. CASPs are required to implement anti-money laundering (AML) and counter-terrorist financing (CFT) measures, including user identification (KYC) and monitoring of suspicious transactions.
2. Transparency and reporting. CASPs should ensure transparency in their operations and provide detailed information about their activities to regulators and users.
3. Security and data protection. To minimise the risks of asset loss or data breaches, CASPs are required to use modern security technologies and implement sound internal control systems.
4. Licensing. CASPs must obtain the appropriate licence or regulatory approval to legally provide services.

Under the European Union’s Markets in Cryptoassets Regulation (MiCA), CASPs are regulated to create a transparent and safe environment for users. MiCA sets out clear requirements for licensing, risk management and consumer protection.

The role of CASPs in the digital economy continues to grow as they facilitate the development of innovative financial technologies and provide access to cryptoassets to a wide audience. However, the success of CASPs depends on their ability to adapt to changing regulatory requirements, adopt new technologies, and ensure a high level of trust from users.

How will MiCA regulations affect crypto exchanges?

With MiCA Regulation (Markets in Crypto-Assets Regulation) coming into force, cryptocurrency exchanges, or cryptoasset exchange service providers, face a new level of regulation in the European Union. MiCA creates uniform standards for the operation of crypto exchanges, which aims to increase transparency, protect users and minimise risk. However, it also requires exchanges to make significant changes to their operational processes and business models.

MiCA imposes a number of mandatory requirements on cryptocurrency exchanges, including licensing, risk management, ensuring the protection of users’ funds and compliance with transparency standards. Exchanges are now required to obtain a licence in one of the EU countries, allowing them to offer services throughout the Union. The licensing process includes providing detailed information on the business model, internal structure and risk management measures. Exchanges must implement systems to protect customer funds, including asset segregation, and develop compensation mechanisms in the event of loss of funds. MiCA requires exchanges to establish clear risk management policies that include measures to prevent cyberattacks and ensure the security of user data. Cryptocurrency exchanges are required to provide customers with full information about the services they offer, the risks associated with cryptoassets and their internal processes.

For cryptocurrency exchanges, MiCA creates both challenges and opportunities. On the one hand, the regulation requires significant investment in adapting infrastructure and internal processes, which increases operational costs. On the other hand, MiCA compliance opens access to the EU single market, increases investor and user confidence, and reduces the likelihood of legal risks. Some exchanges have already started to adapt to the new requirements. For example, major international exchanges are expanding their risk management and compliance teams to meet MiCA standards. Local exchanges are considering mergers or partnerships with larger players to gain access to the necessary resources.

Regulated United Europe (RUE) provides comprehensive support to cryptocurrency exchanges as they adapt to MiCA. Our team of experts helps you choose the right jurisdiction for licensing by analysing your business and recommending the EU country that best meets your objectives and minimises regulatory costs. We develop all necessary documents, including risk management policies, internal regulations and reports to regulators. If the exchange handles users’ personal data, we help implement data protection procedures and ensure GDPR compliance. We provide training for teams to ensure they are ready to work under the new standards. We support exchanges throughout the licensing process and provide support in case of inspections or requests from regulators.

MiCA Regulation brings significant changes to cryptocurrency exchanges, setting strict standards for their operations. However, compliance with these requirements opens up new opportunities for growth and a stronger position in the EU market. By working with Regulated United Europe, exchanges have access to expert support and tailored solutions to help them minimise risks and take advantage of the new regulation.

Licensing of cryptoprojects under MiCA

MiCA Regulation (Markets in Crypto-Assets Regulation) is the world’s first comprehensive legal framework for the regulation of crypto-assets adopted by the European Union. It aims to ensure financial market stability, protect users and reduce the risks associated with the use of crypto-assets. MiCA establishes uniform rules for EU member states, which simplifies cross-border transactions and promotes innovation in the cryptocurrency sphere.

MiCA brings significant changes to the regulation of the cryptocurrency market in the EU. One of the key aspects is the introduction of licensing for cryptoasset issuers and cryptoasset service providers (CASPs). The regulation requires transparency and detailed disclosure of cryptoassets, including their functionality, risks and user protection mechanisms. MiCA also strengthens controls over stablecoins, including e-money tokens and asset-referenced tokens, requiring maintenance of reserves and regular reporting. In addition, the regulation introduces risk management obligations, which strengthens trust in cryptoassets and reduces the likelihood of fraud.

MiCA covers a wide range of cryptoassets and companies. The regulation covers utility tokens, asset-referenced tokens, e-money tokens and other digital assets that are not subject to existing financial laws. This includes token issuers, cryptocurrency exchanges, custodial providers, cryptoasset exchange providers and decentralised finance platforms (DeFi) if their activities meet certain criteria. Thus, MiCA creates a single legal space for all participants in the crypto industry in the EU, ensuring transparency, security and stability.

Licensing of cryptoprojects under MiCA

To obtain a licence under MiCA, crypto projects must meet a number of strict requirements. This includes providing details of their business model, governance structure, risk management mechanisms and user protection measures. Companies are required to demonstrate financial strength and the availability of reserves necessary to fulfil their obligations to users.

Token issuers, such as utility tokens, asset-referenced tokens and e-money tokens, are required to disclose full information about their tokens, including their functionality, risks and collateral. For stablecoins, special attention is paid to provisioning and liquidity. Cryptoasset service providers (CASPs), including exchanges, custodial providers and exchange providers, must comply with additional requirements to protect user funds and transparency of transactions.

Compliance with the new standards requires the implementation of effective internal control and risk management procedures. Companies must develop and implement policies to minimise operational, financial and legal risks. Regular reporting and liaising with regulators are also becoming mandatory.

Working with a law firm such as Regulated United Europe (RUE) helps crypto projects successfully complete the licensing process and adapt to MiCA requirements. RUE provides support at all stages, including choosing the right jurisdiction, preparing documentation, developing risk management strategies and training employees. This allows companies to minimise legal risks and focus on developing their business within the new EU regulatory landscape.

How can Regulated United Europe help with MiCA regulation for crypto asset service provider (CASP)?

With the implementation of MiCA Regulation (Markets in Crypto-Assets Regulation), the European Union has set new standards for Crypto Asset Service Providers (CASPs), which opens up significant business opportunities but also requires compliance with strict regulatory requirements. Crypto Asset Service Providers play a key role in the crypto-asset ecosystem, providing storage, exchange, asset management and other functions. Regulated United Europe (RUE) provides comprehensive support for CASP projects, helping to meet MiCA requirements and successfully launch projects in the European Union.

MiCA aims to harmonise the regulation of crypto services in the EU, ensuring transparency, user protection and risk management. However, CASP regulation occurs at the member state level, resulting in significant differences in adaptation periods and requirements. For example, Germany and France already have a developed regulatory infrastructure, which simplifies licensing, while countries such as the Czech Republic and Estonia provide a more crypto-friendly environment for startups.

Regulated United Europe helps companies assess their business model and select the best jurisdiction for their CASP project. We conduct a detailed analysis to identify the most favourable and appropriate jurisdictions for your needs. In addition, we develop a strategy to customise your project to MiCA requirements, including the preparation of all necessary documentation.

Key aspects for CASP under MiCA include:

1. Companies are required to obtain a licence in one of the EU countries in order to provide their services within the single market. RUE accompanies the licensing process, helping to collect and submit the necessary documents.
2. Risk Management. MiCA requires CASPs to put in place effective procedures to manage operational, financial and legal risks. We develop bespoke policies and processes to meet these requirements.
3. GDPR Where CASP’s activities involve the processing of personal data, the provisions of the GDPR must be complied with. RUE provides support in establishing data protection procedures, appointing a DPO and conducting DPIAs.
4. Transparency and user protection. Companies have a duty to inform customers of the risks associated with their services and to protect user funds. We help develop information materials and procedures that comply with MiCA

Examples of CASPs successfully adapting to MiCA include companies that have incorporated in crypto-friendly jurisdictions such as Estonia or the Czech Republic. These projects have implemented effective risk management mechanisms and accessed the EU single market, attracting institutional and private investors.

Partnering with Regulated United Europe provides your projects with unique advantages. We provide long-term support, including monitoring of regulatory changes, staff training and advice on dealing with regulators. Our goal is to help your CASP project succeed in the new regulatory environment and ensure its sustainability within the European Union.