MiCA & CASP - EU License for Crypto Brokers, Banks and EMIs – Addressing the elephant in the room

Introduction of MiCA and CASP – our thoughts and considerations

Since 2023, the European Union has been trying to harmonise its regulation affecting crypto assets given the relentless demand by both investors and institutions to trade crypto-assets, from stablecoins to unbacked cryptocurrencies tokens digital assets like other securities and commodities which are currently being regulated by the MIFID.

As a result, the MiCA & CASPs legislations were issued which similarly to MIFID deploys the framework for the legislation of all entities dealing with these high-risk financial assets. MiCA and CASPs legislation are in fact detailed and in line with MIFID as the majority of MIFID requirements for brokerage houses and regulated entities are also included in the MiCA and CAPSs legislation but tailored for the crypto industry.

So, what is the elephant in the room?

If the EU has issued legislation to regulate crypto assets and related digital currencies and tokens what is missing? The EU banking support!

Following numerous clients’ requests and enquiries, still, we have not been able to identify an EU bank comfortable in opening corporate bank accounts for entities dealing with Cryptocurrencies. This is not the case for personal bank accounts.

In other words, the legislation is out there, EU licenses (CASPs) or authorisations can be issued to banks, EMIs, Investment Firms (new or existing) to trade cryptos but no bank within the European Union is willing to onboard such regulated clients.

This is also the case in Cyprus. CySEC can issue a CASP license to an entity but no Cyprus or other EU bank will be willing (at the time we are writing this article) to onboard these heavily regulated clients.

This is problematic as the fundamental objective of MiCA and the CASP license is no met. Investors protection that is!

What why is it a big deal?

One may argue that an entity may obtain an EU CASP license and find banking solutions from 3rd countries. Why is this a problem? Even though this may be true, what happens to investors protection?

The whole idea of having Crypto license (whether a bank, a brokerage or an EMI) is to protect the EU investors. How can they be protected when the banks used to receive their money and exchange them to non-FIAT currency are no regulated and as a result risky? Let’s not forget that banks go bust like any other type of business more often that though so. This is very much the case with banks from 3rd countries, with very little and relaxed banking requirements and supervision.

CYAUSE Audit Services is a regulated audit and assurance firm with office in Cyprus and UAE. Our portfolio comprises of regulated entities such as investment firms and funds dealing with risky assets such as cryptocurrencies and we assist them with compliance and reporting services. If you need a CASP license or you have a license and you need compliance and support services feel free to conduct as at enquiries@cyprusaccountants.com.cy or call us at + 357 22 336 309. 

Therefore, it seems that we are at the early days of the transition to the correct and appropriate MiCA implementation as following the issuance of CASPs licenses in different EU member states then the banks will have to accommodate these licenses. The EU can not offer licenses solutions not supported by its own banks. We believe this is the case as we are experiencing the transition to these legislations into practise and that these issues will be resolved within the next few years.

From experience and as mentioned above, existing CASPs licenses satisfy their banking needs with 3rd country banking providers contrary to the spirit of MICA simply because there is no way around it. Time is needed for the EBA (European Banking Authority) in Brussels to derive to the equivalent, secondary legislation to assist European banks accommodate these licenses.

In Conclusion

We are pleased to see that MiCA and CASPs will regulate and harmonise the crypto space within Europe with investors protection in mind. As with all regulations, investors protection comes at a heavy regulatory cost, a burden to the regulated entities which is transferred to the investors. It is the solution to a problem which needed to be resolved for many years. With the enhance due diligence requirements, AML, strict policies and procedures and strict supervision application MiCA via its CASP licenses will achieve its objectives within the EU. We also anticipate that in the near future, EU banks will welcome the CASPs providers following EBA instructions.

MiCA not only harmonizes crypto regulations across the EU, eliminating fragmented national laws and creating a level playing field but it urges countries with fragmented regulations (e.g., US, UK, Asia) to adopt similar frameworks making such legislation the norm for these assets. Over and above as non-EU firms must comply with MiCA to access the EU market investors protection is likely to be a given!

Disclaimer: The information provided in this article is for general informational purposes only and should not be construed as legal or tax advice. Please consult with a professional tax advisor for advice on your specific situation.

About Us

CYAUSE Audit Services Ltd is performing licensing and statutory compliance services to investment firms and funds established in Cyprus and abroad. We have been successfouly dealing with regulated entities for more than a decate and our CEO Mr Tramountanellis has been siting in various boards of Cyprus Investment Firms.

CYAUSE Audit Services is an Audit & Assurance firm with offices in Cyprus and the UAE. During 2015 we have been awarded by I.C.P.A.C and the A.C.C.A (local and international association of Chartered Certified Accountants) for the Quality of our Audit Services and our Office's Procedures.

Being a Truly International Audit & Assurance firm, we have associates from all over the world and we are constantly looking for new associates to expand our network further. At present, CYAUSE Audit Services operates internationally as Accace Circle, a co-created business community of like-minded BPO providers and advisors who deliver outstanding services with elevated customer experience. Our network covers almost 40 jurisdictions with over 2,000 professionals, it supports more than 10,000 customers, mostly mid-size and international Fortune 500 companies from various sectors, and processes at least 170,000 payslips globally.

CYAUSE Audit Services Ltd is also a member of BKR International one of the biggest US Accounting Associations of the word and the 3E Accounting Network, an international accounting network which originates from Hong Kong and has more than 80 members from all over the world.

Contact Us

If you would like us to assist you with your investment firm or fund please contact us at enquiries@cyprusaccountants.com.cy or call us at +357 22 336 309.

Learn More about Cyprus Corporate Environment

Information about CYAUSE Audit Services and the Cyprus Corporate & Tax System can be obtained from our Website or our YouTube channel which provides valuable information about the Corporate & Tax Environment of Cyprus.