On December 2024, the ground shook in the global crypto world. Or, at least that's what conted the legislators of the new EU legislation for the Markets in Crypto Assets Regulation (MiCA), which, like the GDPR and the EU legislation on artificial intelligence, applies to anyone operating within the EU, even if they are not physically in Europe. You did not feel it? Well, you may still…
The crypto market has always presented itself as the answer to the "will of the people" to rid themselves of onerous regulation and to conduct its financial business using currencies which value is set by the free market without institutional intervention. However, reality shows that the lack of regulation and institutional connection also brought dangers and a multitude of fraud and scams. MiCA attempts to solve the problem, create regulatory uniformity throughout the EU, and create, in effect, a regulatory envelope for the crypto markets operating within its boundaries. However, how effective will it be in a market that, as noted, has established itself on the idea of rebellion against any institutional or regulatory control? That remains to be discovered!
The legislation, in effect, stipulates that all Crypto-Asset Service Providers (CASPs), which are defined therein as "a legal person or other undertaking whose occupation or business is to provide one or more crypto-asset services to clients on a professional basis", are obligated to register and receive approval for their activity from a competent authority (unless they have other authorization for their activity, such as financial institutions, credit providers, etc.) and are obligated follow the standards that have been set or will be.
In contrast to previous legislation on the subject, MiCA significantly expands the definition of CASP with respect to the services provided, but narrows its application mainly to cryptocurrencies (as opposed to the definition used outside the EU of VASP – Virtual Asset Service Provider, which also applies to other digital assets, such as tokens representing physical assets such as bonds or real estate). Thus, MiCA's definition of CASP narrows down and concentrates mainly on services related to currency trading, but expands the list of such services. For example, it also applies to crypto consulting providers (who may, or may not, directly perform transactions), operators of trading platforms, and those who merely perform actions in accordance with client instructions.
The legislation specifies the process by which CASPs will be required to submit applications for registration, the criteria under which they will be granted a permit (or the permit may be withdrawn), the powers of the supervisory authority and the obligations imposed on the activity of the CASPs. As of the beginning of 2025, the legislation stipulates that all CASPs must complete the registration and application process by July 01, 2026, or they will be required to cease operation.
Thus, for example, CASPs will now be required, inter alia: to act professionally, follow standards and policies, and to promote the interests of their customers; to maintain a physical address and office within the EU and to have at least one director who is an EU citizen and resident; Hold a minimum equity to be set by the Competent Authority dependent on the type of crypto services provided; disclose their ownership structure of the CASP; and refrain from providing services by third parties that are not authorized and registered in the EU.
This is, without a doubt, an important legislation that has the potential to have a significant impact on the global crypto market, and it requires service providers and entities active in the crypto market to quickly organize in order to regulate their activities before the deadline, through law firms that are familiar with the field and are part of a network of law firms that also have offices in the European Union.