Licensing changes with MiCA: the key elements to remember

The licensing of crypto businesses in Europe will change drastically once the new MiCA regulation is in full force. LegalBison has composed a short checklist of what to remember and expect from the new set of rules when it comes to the licensing process.

MiCA for new companies: what will be required?

All new companies that are either CASPs or Issuers of crypto-assets (CAs) fall under the scope of MiCA, which means that new licensing requirements apply to them now that the regulation came into force.

Assess the right level of licensing

First and foremost, it is important to properly define the right level of licensing depending on the token types the company plans to issue or offer trading and other services with. All services under the MiCA framework will be divided into services with EMTs (e-money tokens) and ARTs (asset-references tokens). You can find out more about both in our recent blog post on the token classification under MiCA.

Companies engaged in any activities involving these token types must evaluate and adjust their business models to comply with the MiCA regulation. This must be done with consideration that only credit and electronic money (EMI) institutions will have the right to issue EMTs under MiCA.

Issuers of crypto-assets (CAs) are defined by MiCA as companies that issue crypto-assets not classified as securities or financial instruments. This means that your project might require some legal evaluation to ensure that the tokens it offers cannot be deemed as either of those. In case a company creates a new type of cryptocurrency, it must comply with the MiCA regulation unless the crypto-asset is considered a traditional security or a financial instrument.

Acknowledge the requirements

Before beginning the registration of a crypto company in Europe, the next important step is to acknowledge the licensing requirements. It is key to act in synergy with these requirements in order to obtain a legal permit without complications.

It is not as difficult as it might seem: even though there are more requirements now, they all aim to make the licensing process more streamlined and equal for everyone. Some of the key requirements will include:

• Office with an EU address;
• Business plan and a program of operations;
• For CAs: a legal opinion as proof that the issued ARTs do not classify as EMTs or other assets excluded from the scope of MiCA;
• Identity documents and certificates of non-criminal record (including absence of sanctions in regards to any professional committees and of sanctions/penalties of civil law character) of all key members;
• CA white paper with general information on the project;
• Description of contracts with third parties;
• Business continuity policy, internal control mechanisms, and risk management procedures;
• Data protection measures;
• Complaint-handling procedure.

Proper preparation of the project’s whitepaper

One of the primary new elements introduced by MiCAR is an obligatory white paper for all license applicants. The white paper must contain general information on the project, its offeror, raised capital, rights and obligations attached to provided services, underlying technology, and the risks related to running the business.

Along with a white paper, each applicant must submit a legal opinion defining the types of tokens the company is going to issue and proving that they do not classify as any other token types (ARTs do not classify as EMTs or other types excluded from MiCA).

Both of these documents require the diligence and precision of an experienced lawyer; we strongly advise you to reach out for LegalBison’s assistance while preparing your project for licensing under MiCA.

MICA for registered VASPs in Europe: what changes now?

If you are already running an operating and licensed VASP in Europe, under the MiCA regulation, your company will have to requalify as a CASP (Crypto-Asset Service Provider). The term fully replaces VASP and encompasses companies offering services related to cryptocurrencies, including exchanges, trading platforms, wallets, portfolio management, and crypto advice.

In order to prepare your company for MiCA, several strategic steps are needed.

Ensure compliance

In addition to the licensing requirements listed above, a CASP must ensure its AML-CFT compliance, which remains a core aspect of the European regulation. The practices of the company, its documentation, and compliance processes must align with MiCA, including the proper token classification according to the new standards.

The proper operation of a CASP, therefore, relies on compliance with the set requirements at the licensing stage and its obligations and duties as a market participant. As for any financial service company, MiCA imposes on European crypto companies the requirement to monitor transactions and report suspicious activity to the regulatory authorities.

Do not assume exemption, seek legal advice

As a crypto business owner, you must realize that companies may incorrectly assume that they are exempt from MiCA. The new regulation can be very meticulous in stipulating the obligations of different business models. Henceforth, LegalBison must conduct a proper assessment of your company, lay out your new obligations under MiCA, and assist you in evaluating your business model and possible gaps in compliance.

Even though your project may be decentralized, there is no guarantee that it is exempt from the MiCA regulation until a qualified lawyer has assessed its status. We encourage you to seek guidance from our consulting team for more information.

Acknowledge the severity of the sanctions for non-compliance

Be aware that any act of non-compliance under MiCA will not be overlooked. The regulation will have the force to impose severe sanctions on those companies that fall under its scope but fail to fulfill any of the requirements. Henceforth, it is crucial to acquaint yourself with both the new rules and the potential sanctions for non-compliance with them.

Now is the time to get ready for MiCA

Prepare your company for MiCA by using the professionalism of our lawyers, backed by years of experience in the crypto sphere. LegalBison will evaluate your business from A to Z and guide you through all the compliance steps so that once MiCAR is enforced, your crypto company is in running order.