Everything you need to know about MiCa licensing
The MiCA Regulation has developed a pan-European framework for cryptocurrency service providers (VASPs) and virtual assets. The regulation includes requirements for issuing digital coins backed by real monetary value and digital coins based on blockchain technology. MiCa licensing can be an excellent solution for you if you want to work legally and attract more clients throughout Europe.
MiCA is a regulatory body that will oversee the activities of crypto companies in European countries. The main task is to create a unified regulatory framework of the European Union for organizations related to virtual assets: exchange, trade, and provision of various services, including electronic storage.
This decision is justified because each European country has its requirements and rules for running a cryptocurrency business; now, it will be a set of general rules that applies to all European countries. A period of 18 months has been allotted for the transition from local authorities to general ones, starting with adopting the MiCA regulations on May 16, 2023. This set of rules will also include the rights and protection of clients about VASPs. In other words, the Regulation will apply to all companies related to virtual assets.
Which companies need licensing?
We list the types of activities of cryptocurrency organizations that will be subject to MiCA licensing requirements:
- provision of electronic wallets and crypto management for the company’s clients;
- carrying out financial exchange transactions: digital coins for fiat money or one type of digital coins for another;
- provision of a particular service for carrying out cryptocurrency activities;
- acceptance for execution of various orders that involve actions with electronic assets;
- transfer of digital coins or cryptocurrency orders to a third party.
It is worth highlighting as a separate activity related to issuing electronic coins, which will also connect to the regulation. The most stringent requirements will apply to electronic money and tokens tied to assets. It is due to the possibility of significant risks for the financial system of the European Union.
Based on the Regulation, there will be three types of electronic means in European countries:
- tokens that have a specific price tied to fiat funds;
- e-money tokens;
- cryptocurrency differs from tokens but is tied to value and electronic money.
E-money tokens are a type of crypto asset needed to maintain a stable value based on the price of one official currency.
Tokens that are tied to the price of fiat funds are not, by definition, electronic money tokens. They aim to ensure the currency’s stability by reference to some value.
The Regulations provide several requirements that must be met by all companies related to virtual assets. If an organization is already licensed and plans to continue providing the services listed in the previous section, they do not need to re-license under the MiCA rules. A reasonably long transition period of 1.5 years has been provided for some changes.
The new permit requirements will apply only to unlicensed companies planning to engage in crypto business. If a company is just about to start cryptocurrency activities, then for licensing, it is necessary to submit an application to the Regulator in the state where it is planned to obtain a license. All requirements that a VASP company must fulfill to get a cryptocurrency license will be similar to those that apply to financial service providers.
First of all, you will have to prepare the necessary documents, including:
- a detailed business plan of the company confirming the financial feasibility of this activity;
- documentary confirmation of the legal origin of the source of capital;
- information about shareholders and management (identity cards, diplomas of financial education and work experience in this field, certificate of no criminal record and debt, confirmation of registration);
- program to identify financial and cyber risks – to provide reliable software protection and safety of clients’ confidential data and crypto-assets;
- presence of a physical office, technically equipped by the requirements;
- implementation of AML (combat illegal money transfers) and KYC (know your customer) policies with the appointment of responsible officers.
It is not a complete list of requirements, but the main one that will be presented in any European country. Thus, for licensing in one of the European countries, it is necessary to fulfill all the requirements of the Regulations, and licensed firms only need to adapt within 1.5 years.