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MiCA: start preparing
11 March 2024

In order for crypto-asset service providers, also known as Crypto-Asset Service Providers (“CASPs“) to operate within the EU, the Markets in Crypto-Assets Regulation (“MiCA“) requires, that those parties have to be in possession of a license by 30 December 2024. The AFM has indicated that CASP license applications can be submitted beginning from 22 April 2024 and, if approved, can be used from 30 December 2024.

Currently, parties offering crypto services in or from the Netherlands must be registered with DNB under the Money Laundering and Terrorist Financing Act (“Wwft“). These registered parties have to comply with MiCA and will require a CASP license by 30 June 2025. Since the license application may take several months future CASPs are advised to prepare the license application timely and with care.

Registration regime
At the time of writing, parties offering crypto services in or from the Netherlands must have been registered with DNB. This registration requirement applies under the Wwft for offering two specific types of services around virtual currencies. These are:

  • exchange services between crypto currency and regular currency; and
  • the provision of custody wallets, in other words entities offering services to secure cryptographic private keys on behalf of their clients to hold, store and transfer virtual currency.

In practice, people interpret this registration as a disguised license application. This is because DNB applies similar admission requirements to a license application when assessing the registration application. These apply inter alia in the areas of know-your-customer (“KYC“) examination, transaction monitoring, anti-money laundering policy and reliability and suitability assessment of, among others, directors, other (co-)policymakers and holders of a qualifying holding in the service provider.

Upon entering into force MiCA will have direct effect and the above-mentioned DNB registration regime becomes redundant. As a result, MiCA does not provide for an option to convert a DNB registration into a CASP license. Currently, the DNB supervises parties that offer crypto services, going forward the AFM will be responsible for the supervision of CASP’s.

Compared to the Wwft registration regime for the provision of crypto services, a larger number of services are regulated under the concept of crypto asset services through the MiCA licensing regime. This will result in the further professionalization of the crypto sector and a level European playing field with regard to:

–           providing advice on crypto assets;

–           operating a crypto asset trading platform;

–           exchanging crypto assets for other crypto assets;

–           holding and managing crypto assets on behalf of clients;

–           placing crypto assets;

–           exchanging crypto assets for cash;

–           receiving and transmitting crypto asset orders on behalf of clients;

–           executing crypto asset orders on behalf of clients;

–           providing portfolio management for crypto assets; and

–           providing crypto asset transfer services on behalf of clients.

During the CASP license application, the crypto service provider will have to demonstrate compliance with MiCA requirements. For market participants, the advantage of the license is that – after going through a relatively simple notification procedure – they will be allowed to offer their services within the EU (“European Passport“). On the other hand, parties must meet (ongoing) requirements relating to disclosure, capital and governance.

CASP Pre-scan
Before a party decides to submit a CASP license, the AFM provides the option to enter into an pre-scan procedure. This process clarifies the requirements and may be supportive in the decision process to submit a license application. At the same time, it caters for a smoother process license submission and promotes mutual knowledge sharing between market participants and the AFM. This pre-scan option has been available since January of this year.

The AFM stresses that the pre-scan is not intended to determine whether certain activities fall within scope of MiCA, nor is the pre-scan a substitute for the formal assessment following a license application. The pre-scan consists of:

(i) an introductory meeting with the AFM to agree on the content and timing of the pre-scan;

(ii) completing an AFM questionnaire with a number of relevant topics, including and (if deemed necessary) substantiation of the answers by providing documentation;

(iii) a meeting with the AFM during which an explanation of the answers to the questionnaire can be given by means of a presentation. After the presentation, the AFM will respond to the answers and explanations given and discuss these with the potential CASP; and

(iv) receiving written feedback from the AFM on the provided answers, including the intended timeline regarding the submission of the CASP license application.

If you would like to know whether or not your provided services fall under the scope of MiCA, would like guidance on a potential CASP license application or pre-scan with the AFM please contact us.

MiCA: start preparing