Dr Jane Nweike
Introduction
MiCAR Compliance for MIFID Firms Intending to Provide Crypto Assets Services
The Markets in Crypto Assets Regulation (MiCAR) is a recently enacted EU-wide legislation. Essentially, it regulates the issuance of crypto-assets and the provision of crypto-asset services.
Furthermore, Recital 54 of MiCAR provides that certain firms subject to EU legislation on financial services should be able to provide crypto-asset services without being required to obtain an authorisation. However, such firms will be required to notify their national competent authority before commencing crypto-asset services. These players include authorised ‘Credit Institutions’ under Directive 2013/36/EU and authorised Investment firms under MIFID II.
Such firms will be considered as crypto-asset service providers (CASPs), and will, therefore, be subject to all the requirements applicable to CASPs under MiCAR. They will, however, be exempt from the requirements relating to authorisation, own funds, and the approval of members and shareholders with qualifying holdings, since they would have already met these requirements.
For providers already operating in Malta, we have issued a Document Brief with more specific info. Moreover, do not hesitate to consult with one of our experts today!
What Crypto Services can Investment Firms Provide?
MiCAR Compliance for MIFID Firms Intending to Provide Crypto Assets Services
According to Article 60(3) of MiCAR, an investment firm can provide crypto-assets services equivalent to the investment services and activities for which it is specifically authorised under MIFID II. Thus, extending their licensable activities in relation to financial instruments also to crypto-assets.
The investment activities regulated under MIFID II are:
- Reception and transmission of orders in relation to one or more financial instruments.
- Execution of orders on behalf of clients.
- Dealing on their own account.
- Portfolio management.
- Investment advice.
- Underwriting of financial instruments and/or placing of financial instruments on a firm commitment basis.
- Placing of financial instruments without a firm commitment basis.
- Operation of an MTF.
- Operation of an OTF.
Thus, an investment firm that is authorised to carry out any of the above activities in relation to financial instruments under MIFID can also provide them in relation to crypto-assets without needing to obtain separate authorisation. However, the firm will be required to notify its national competent authority before it commences the crypto-asset service.
How Soon Can an Investment Firm Authorised Under MIFID Commence Crypto-asset Services?
MiCAR Compliance for MIFID Firms Intending to Provide Crypto Assets Services
In essence, MiCAR will enter into force from December 30, 2024. EU member states will be required to have transposed it into law by the same date. From this date forward, investment services firms will be able to submit to their national competent authority a notification of their intention to provide crypto-asset services.
The notification will be required to contain, among other things, a programme of operations setting out the types of crypto-asset services to be provided, together with a description of the ICT and security systems, a procedure for segregation of client’s funds, and custody and administration policies.
The notification will need to comply with the technical standards which will be issued by the European Securities and Markets Authority (ESMA) before December 30, 2024. Furthermore, ESMA has published a draft of the proposed Technical Standards for public consultation here. It may be a useful guide for preparing the notification and supporting documents.
Conclusion : Next Steps
MiCAR Compliance for MIFID Firms Intending to Provide Crypto Assets Services
In conclusion, here are many elements to consider in preparation for MiCAR’s entry into application. Investment services firms that intend to provide crypto-asset services can commence preparing the policies, procedures and other documents to be eventually submitted to their national authority together with the notification.
Such firms are encouraged to seek legal advice about their compliance obligations under MiCAR, in order to begin taking preparatory steps towards meeting those obligations. Are you looking to leverage your MIFID licence to extend your services to Cryptocurrencies? If yes, contact us for expert legal advice to execute your intentions!
More about MK Fintech Partners Ltd.
Michael Kyprianou Fintech Partners Ltd is a Maltese licensed VFA Agent (virtual financial assets agent). It comprises a team of dedicated experts who provide services such as advisory, licensing and registrations of activities related to Fintech, Crypto, Blockchain, Investment, company incorporations and banking. and other ancillary services. MK Fintech Partners forms part of the Michael Kyprianou Group, a top tier international legal and advisory firm. It has established an enviable reputation as a broad-based legal practice over the years. Mainly by keeping at heart its principle to always exceed its clients’ expectations. MK has grown to become one of the largest law firms in Cyprus with offices in Nicosia, Limassol and Paphos. The MK Group’s international presence also includes fully-fledged offices in Greece (Athens and Thessaloniki), Malta (Birkirkara), Ukraine (Kiev), the United Arab Emirates (Dubai), United Kingdom (London), Israel (Tel Aviv), and Germany (Frankfurt).
The content of this article is valid as at the date of its first publication. It intendeds to provide a general guide to the subject matter and does not constitute legal advice. We recommend that you seek professional advice on a specific matter before acting on any information provided. For further information, contact us at MK Fintech Partners via email at contactmkfintech@kyprianou.com or by telephone +356 2016 1010.
