Understanding MiCA Standards For Crypto Companies

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As a seasoned crypto investor with over a decade of experience navigating the ever-changing landscape of digital currencies, I must say that the impending MiCA regulations are a welcome development for the European Union. Having witnessed the challenges faced by companies due to the varying laws across different EU countries, I am excited about the promise of unified governance and sustainable business development at the EU level.

For several years now, Crypto Lawyers have been assisting businesses effectively navigate and secure necessary licenses for operation across different global regions.

The upcoming Markets in Crypto-Assets (MiCA) legislation is set to be enforced across the European Union. This new regulation aims to standardize regulations for the cryptocurrency sector. Our team is excited to provide you with the most recent insights regarding these alterations, as they will affect all participants within the European market and have a substantial impact on the industry as a whole.

What is MiCA, and why are the new regulations necessary?

The MiCA regulation, developed by the European Union, aims to provide uniform oversight for the cryptocurrency market within the EU. This regulatory framework was approved by the European Parliament in April 2023, making it one of the world’s first comprehensive regulations encompassing various types of crypto assets and related services on a global scale.

Historically, cryptocurrency businesses have encountered difficulties because the laws governing Virtual Asset Service Providers (VASPs) differ significantly among European Union nations. This disparity made it difficult to establish a cohesive strategy and slowed down the growth of these businesses on a pan-EU scale.

The MiCA (Markets in Crypto-Assets Regulation) tackles these concerns by setting uniform standards for crypto businesses, irrespective of their European base.

General statement of MiCA

Under the purview of MiCA, a comprehensive set of regulations encompass various cryptocurrency services span from secure storage wallets to digital asset exchange and trading platforms. These guidelines affect three distinct categories of Virtual Asset Service Providers (VASPs), each with unique permitted functions and varying minimum capital requirements.

  1. Class 1 – managing crypto assets, consulting, and execution of orders for assets. EUR 50,000 capital is the minimum.
  1. Class 2 – crypto assets exchange and storage for third parties. EUR 100,000 capital is the minimum.
  1. Class 3 – crypto-fiat exchanges and management of the trade platforms. EUR 150,000   capital is the minimum.

The VASP companies need to have at least three such accounts.

Additionally, these companies will be required to establish a local office and employ key personnel such as the Chief Compliance Officer (CCO), Chief Operating Officer (COO), Chief Financial Officer (CFO), Chief Technology Officer (CTO) and Money Laundering Reporting Officer (MLRO). Notably, MLROs must possess a minimum of one year of professional experience.

As a crypto investor, when submitting an application, I need to prepare a comprehensive business plan along with some internal documents such as frameworks for managing risks, ensuring information security, and implementing anti-money laundering (AML) programs to complete the submission process.

In many EU nations, newly established regulations impose stricter conditions compared to existing norms. This could present a substantial impact on cryptocurrency ventures, as it potentially adds another hurdle for companies seeking entry into the European digital currency market.

How Will the New MiCA Requirements Affect the Stablecoins?

The newly introduced MiCA standards may introduce extra challenges for stablecoins, which could restrict their accessibility within the European market. For example, USDC is currently the first stablecoin to align with MiCA, yet ensuring USDT’s conformity with the new regulations might pose difficulties.

This is due to MiCA enforcing tighter conditions regarding transparency and governance of the reserves backing the stability of cryptocurrencies. Consequently, companies like Tether and others operating in the EU must adapt their business structures and procedures to remain compliant with these new regulations.

At present, there’s some uncertainty about how upcoming regulations might affect prominent stablecoins. Market analysts, though, advise that should the primary providers decide to withdraw from the European market, it may restrict choices for EU users and potentially increase market instability due to volatility.

Changes are already coming into effect

The MiCA regulations are designed to provide a well-organized and consistent legal framework for cryptocurrency businesses functioning within the European Union, ensuring greater stability.

Starting on January 1, 2025, the Markets in Crypto-Assets (MiCA) regulation will take effect. Any businesses offering crypto asset services are expected to meet the latest standards during this time. There is a transition period lasting until June 1, 2025, allowing companies to adapt their operations according to the new guidelines and seek guidance from regulatory authorities as needed.

For small and medium-sized companies, the new MiCA requirements may seem complicated, especially in terms of regular audits and strict compliance with technical and cybersecurity standards. 

To ensure a smooth transition towards adhering to stringent data protection standards and financial transparency rules, it’s crucial to have the expertise of specialists on board. Our dedicated IT-OFFSHORE team stands ready to offer assistance, including providing complete solutions tailored to fulfill all MiCA requirements or proposing viable alternatives.

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2024-11-20 12:20