Understanding MiCA Standards For Crypto Companies

Over the last few years, Crypto Lawyers has successfully helped companies adapt and obtain licenses in various parts of the world.

The new Markets in Crypto-Assets (MiCA) regulation will soon come into effect in the European Union. This regulation establishes unified rules for the cryptocurrency market. Our experts are eager to share the latest information about these changes, which will affect every market participant in Europe and significantly impact the entire industry.

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

MiCA is a lawful regulation developed by the European Union for the unified governance of the cryptocurrency market in the EU. The European Parliament adopted the MiCA resolution in April 2023, and it is one of the world’s first complex regulations spanning a wide range of crypto assets and related services.

In the past, cryptocurrency companies faced challenges due to the varying laws regulating virtual asset service providers (VASP) across different EU countries. This inconsistency created obstacles to a unified approach and hindered sustainable business development at the EU level.

The Markets in Crypto-Assets Regulation (MiCA) addresses these issues by establishing standard norms for crypto companies, regardless of their location within Europe.

General statement of MiCA

MiCA regulates a broad spectrum of crypto services: starting with custody wallets to cryptocurrency exchange and trading platforms. The rules apply to three classes of VASP, and each of them has different types of permitted activities and requirements for minimum capital:

1. Class 1 – managing crypto assets, consulting, and execution of orders for assets. EUR 50,000 capital is the minimum.

2. Class 2 – crypto assets exchange and storage for third parties. EUR 100,000 capital is the minimum.

3. 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.

Moreover, the companies will be obliged to have physical presence (local office) and qualified staff, including the following positions: Chief Compliance Officer (CCO), Chief Operating Officer (COO), Chief Financial Officer (CFO), Chief Technology Officer (CTO) and Money Laundering Reporting Officer (MLRO). It’s important to note that MLROs must have at least one year of work experience.

To submit the application, a business plan and several internal documents, including frameworks for risk management, informational security, and anti-money laundering (AML) programs, must also be provided.

New rules introduce more sophisticated requirements than the current standards in most EU countries. This can significantly affect cryptocurrency businesses, creating an additional barrier to entering the European crypto market.

How Will the New MiCA Requirements Affect the Stablecoins?

New MiCA requirements create additional complications for the stablecoins, potentially limiting their availability on the EU market. For instance, USDC has become the first stablecoin to correspond to MiCA, but USDT’s compliance with the new rules can be an issue. 

This is because MiCA imposes stricter requirements for disclosure and regulation of the reserves that support the stable value of such crypto assets. As a result, Tether and other issuers will need to change their business model and operational process to continue working in the EU.

Currently, it is unclear how the new regulations will impact major stablecoins. However, market experts caution that if the leading issuers choose to exit the European market, this could limit the options available to users in the EU and heighten the risk of market volatility.

Changes are already coming into effect

The MiCA rules promise a more structured and stable legal environment for crypto companies operating in the EU.

The Markets in Crypto-Assets (MiCA) regulation comes into effect on January 1, 2025. Companies providing crypto asset services must comply with the new standards. There is an adaptation period until June 1, 2025, during which the companies can adjust their activities to the new requirements and obtain necessary support and consultations from regulatory bodies.

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. 

In the context of high data protection standards and financial transparency requirements,  the assistance of specialists is essential for successfully transitioning to compliance with new regulations. The IT-OFFSHORE team is prepared to provide support and offer comprehensive solutions to meet all MiCA requirements or suggest alternatives.