Which activities require a license?
A core element of MiCA is regulating crypto services, which can’t be offered until you first get a license from the authorities.
A core element of MiCA is regulating crypto services, which can’t be offered until you first get a license from the authorities. But which activities will be deemed license-required under this concept in the future?
This article first appeared on the Fin Law Blog.
Although the official publication in the Official Journal of the European Union is still pending, the final text of the EU Markets in Crypto Assets Regulation (MiCA) has been available since late September 2022. The new regulation will create a uniform EU-wide framework for crypto-related business models, allowing crypto service providers to operate across Europe under the same rules.
Implementation of MiCA by member states isn’t required. Eighteen months after it takes effect, the regulation will apply directly to market participants and have legal effects without national lawmakers needing to get involved. A core element of MiCA is regulating crypto services, which can’t be provided without an official license first. But which activities will be considered license‑required under this framework?
MiCA contains a catalog of services
MiCA will finally define which activities count as crypto services and thus fall under the newly created licensing obligations. Specifically, safekeeping and administration of crypto assets for third parties, operating a crypto-asset trading platform, exchanging crypto assets for legal tender and for other crypto assets, executing client orders for and placing crypto assets, accepting and transmitting orders for crypto assets for third parties, as well as providing advice on crypto assets, will in the future be license-required activities EU-wide.
MiCA provides definitions to interpret the terms. Safekeeping and custody means secure storage of private keys or other necessary means for third parties to access crypto assets. Advice on crypto assets refers to offering or giving personalized recommendations about using crypto services. All exchange services related to crypto assets, whether in fiat or other crypto assets, will in the future be regulated as regulated activities.
Trading crypto assets for things other than fiat money or crypto assets will not be explicitly covered. In short, crypto services under MiCA are notably modeled after activities that under the current Markets in Financial Instruments Directive (MiFID II) fall under securities regulation.
Only activities related to crypto assets can be crypto services
A mandatory condition for classifying an activity as a crypto service is that it relates to crypto assets as defined by MiCA. This is stated very broadly and covers almost all digital representations of value based on distributed blockchain technology.
