Crypto-Asset Service Provider (CASP)

The CASP (Crypto Asset Service Provider) license under the Markets in Crypto-Assets Regulation (MiCA) is designed for entities providing crypto-asset services within the EU. It mandates compliance with strict operational and conduct standards to enhance investor protection and ensure market integrity, allowing firms to operate across member states without additional licensing requirements.

Overview

Services Provided

  • Issuing crypto-assets

  • Operating crypto exchanges

  • Offering custody services for digital assets

  • Providing crypto-to-fiat and crypto-to-crypto exchange services

Capital Requirements

  • Class 1: EUR 50,000

    Crypto-asset service provider authorised for the following crypto-asset services:

    • Execution of orders on behalf of clients.
    • Placing of crypto-assets.
    • Providing transfer services for crypto-assets on behalf of clients.
    • Reception and transmission of orders for crypto-assets on behalf of clients.
    • Providing advice on crypto-assets.
    • Providing portfolio management on crypto-assets.

    Class 2: EUR 125,000

    Crypto-asset service provider authorised for any crypto-asset services under class 1 and:

    • Providing custody and administration of crypto-assets on behalf of clients.
    • Exchange of crypto-assets for funds.
    • Exchange of crypto-assets for other crypto-assets.

    Class 3: EUR 150,000

    Crypto-asset service provider authorised for any crypto-asset services under class 2 and:

    • Operation of a trading platform for crypto-assets.

Transaction Limitations

  • MiCA sets transaction limits for crypto firms to prevent market manipulation and ensure transparency in trading. Firms must adhere to these limits to maintain regulatory compliance.

Safeguarding Requirements

  • MiCA mandates firms to safeguard client assets, ensuring that they are stored securely and protected against loss, fraud, or hacking. Businesses must implement stringent measures for asset protection.

Jurisdictional Limitations

  • Firms can operate across the EU with MiCA authorisation, but operations outside the EU require adherence to local regulations and additional licensing.

Legal & Regulatory Framework

  • MiCA Regulation

  • The Data Protection Act 2018 and EU General Data Protection Regulation (GDPR)

  • MiFID II

Key Restrictions

  • Restricted from offering unregulated services or high-risk crypto products without authorisation.

  • Subject to limits on speculative investments and crypto-asset trading.

Exemptions & exclusions

  • Excluded activities

    MiCA’s reverse solicitation exemption enables third-country crypto firms to serve EU clients, but only if the client initiates contact independently. ESMA takes a broad view on 'solicitation,' covering promotions and affiliate endorsements, limiting firms' ability to claim this exemption. Additional services can only be offered if they directly relate to the original client request.

Key roles in the company

  • Chief Executive Officer (CEO): The CEO drives the company's vision and overall strategy, making key decisions that shape the company's direction and growth. They lead the executive team and ensure the organisation stays aligned with its goals and values.

    Chief Compliance Officer (CCO): The CCO is responsible for making sure the company adheres to all legal and regulatory requirements. They establish compliance policies, oversee reporting, and work to prevent issues related to data protection, security, and fraud.

    Money Laundering Reporting Officer (MLRO): The MLRO ensures the company meets anti-money laundering standards by overseeing customer due diligence processes and monitoring for suspicious activities. They act as the main contact for AML issues and help manage compliance risks.

Regulatory Updates

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Deep dive into Crypto-Asset Service Provider (CASP)

Introduction

  • MiCA is a comprehensive regulatory framework designed to govern the issuance, trading, and custody of crypto-assets within the European Union. This regulation aims to protect investors and ensure financial stability by overseeing crypto firms, digital wallets, and exchanges. MiCA is critical for businesses operating in the crypto space and seeking compliance with EU standards.

Definition

  • MiCA (Markets in Crypto-Assets Regulation) is the EU’s regulatory framework designed to establish a consistent and comprehensive set of rules for the crypto-asset market. The regulation focuses on improving consumer protection, safeguarding market integrity, and fostering innovation in the crypto industry by setting uniform standards for issuers, exchanges, and custodians of digital assets.

Additional Information (Services)

  • Issuing crypto-assets: Enables firms to create and issue digital assets such as stablecoins and utility tokens while complying with MiCA standards.

  • Crypto exchanges: Allows businesses to operate platforms for trading crypto-assets securely and transparently.

  • Custody services: Offers secure storage and management of clients’ digital assets.

  • Crypto-to-fiat exchanges: Facilitates transactions between cryptocurrencies and traditional fiat currencies.

Additional Information (Legal & Regulatory Framework)

  • MiCA:Governs the issuance, trading, and custody of crypto-assets within the EU, creating a clear legal framework for businesses to operate securely and transparently. It aims to protect investors, reduce financial crime, and support innovation in the crypto industry. MiCA is crucial for ensuring market integrity and coordinate regulations across EU member states.

  • GDPR: EU’s regulation for data privacy and protection. It applies to any entity that processes personal data, including crypto firms under MiCA that handle sensitive client information. Compliance with GDPR ensures that crypto businesses operating under MiCA respect the privacy rights of consumers and protect personal data from breaches.

  • MiFID II: EU regulation aimed at increasing transparency in financial markets and enhancing consumer protection. Though it primarily governs traditional financial markets, it is relevant to MiCA as both aim to ensure market integrity and safeguard investors. MiCA adopts some of MiFID II’s principles to regulate crypto-assets similarly to traditional financial instruments.

Links

Additional Information (Key Restrictions)

  • Crypto firms operating under MiCA are limited in offering high-risk crypto products and must ensure transparency and fair trading. The regulation sets strict rules for the protection of client assets and mandates reporting on suspicious activities.