Once the provisions of the new Markets in Crypto Assets Regulation (MiCA) come into force, crypto asset services will probably be subject to a permit from the competent supervisory authority at the end of 2024. The crypto service providers, which will then be regulated, will only receive the permits required for business operations if they meet the comprehensive regulatory requirements provided for in the MiCA. A key requirement will be providing crypto service providers with sufficient capital to secure their business operations. Despite the MiCA, which is basically very similar to the securities regulation, the specific amount to be held available is regulated differently than under the second Markets in Financial Instruments Directive (MiFID2). Because according to MiCA, there will be two methods for determining the amount of security, of which the one that calculates the higher amount for the respective crypto value service provider will be decisive.
Minimum amounts for the capital endowment of crypto service providers according to MiCA
When applying for a MiCA license and also after the license has been granted in ongoing business operations, crypto service providers will have to maintain at least a regulatory security capital, the amount of which depends on their specific business model and the crypto services performed with it. In this respect, there will be three classes of crypto value service providers, for each of which a different minimum hedging amount will apply. Crypto service providers that only offer their customers services related to order acceptance and forwarding, advice, order execution, placement, portfolio management or transaction execution for crypto assets will be assigned to class 1 and will require a minimum capitalization of EUR 50,000. In contrast, the minimum capital for crypto custodians and crypto administrators as well as crypto exchange providers (class 2) is already 125,000 euros. According to the wording of the MiCA, the minimum amount required for operators of crypto exchange platforms (class 3) will be EUR 150,000.
Determination of the regulatory minimum capital via the fixed operating costs
The minimum amount shown in MiCA for the capitalization of crypto service providers will only be sufficient as a safeguard if it is higher than a quarter of the fixed operating costs of the previous year. If this amount is higher, however, the crypto service provider must be able to show this amount as regulatory minimum capital. MiCA will require all crypto service providers to calculate their fixed operational costs annually, so the relevant amount will not be a static amount as under the MiFID regulation. In summary, crypto service providers can assume that they must always hold at least a quarter of their fixed operating costs from the previous year as regulatory minimum capital and that this amount must not fall below the minimum amount specified by MiCA and applicable to the company concerned.
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