The current regulation of crypto assets in Europe is particularly grotesque because it only regulates what has always been an international market at national level. Cross-border business models must therefore be regularly brought into line with all relevant national regulatory regimes. One of the most important objectives of the European Union is the promotion of the European internal market and the removal of legal hurdles in the implementation of cross-border cooperation in the European economy. It is therefore time that the patchwork quilt in crypto regulation that still exists within the EU is abolished and that the European internal market is also implemented in the crypto market.
To this end, the future EU Regulation on Markets in Crypto Assets (MiCA) provides rules for the uniform offering of crypto services in several member states. The legislator bases the new rules for cross-border crypto services closely on the rules of the so-called EU passporting in the area of investment services. As a result, crypto service providers will in future be able to offer their services in other EU countries with comparatively little effort, without requiring additional permits under the MiCA in the target countries.
Requirements for MiCA passporting of crypto services
Providers who want to offer cross-border crypto services in the European Union must in any case have a MiCA permit in a member state. The authority that issued the MiCA license, i.e. BaFin in Germany, will initially be responsible for the passporting process. For a successful application for passporting, the crypto service provider must submit a list to the authority that shows which specific crypto services are to be provided in which specific member states. He must also state when he plans to actively offer the crypto services in the countries concerned.
In addition, it is necessary to state which other business activities not regulated according to MiCA will be offered by the crypto service provider. This includes activities that are not regulated at all, as well as those that require authorization and supervision under other regimes. Examples include payment services within the meaning of the second Payment Services Directive (PSD2), investment services under the Markets in Financial Instruments Directive (MiFiD2) or other commercial activities that do not require a license, such as the manufacture of hardware or the rental of buildings.
Short process duration in MiCA Passporting
BaFin will have to pass on the information received to the competent national authorities in the target countries as well as to the European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA) within 10 working days. ESMA will then publish the information in the uniform European crypto service provider register maintained on its website in order to enable all market participants in Europe to check whether a provider’s offer is legal and covered by a MiCA permit. Immediately after the information has been forwarded to the specified offices, BaFin will inform the crypto service provider that the information has been forwarded.
As soon as the crypto service provider has received this notification from BaFin, but no later than 15 calendar days after the information has been sent to BaFin, the crypto service provider may actively offer its MiCA-regulated crypto services in the selected target countries. The prerequisites for successful passporting according to MiCA are the existence of a MiCA license in the home country and the transmission of the information mentioned to BaFin. If this information is not complete, for example because the crypto service provider has concealed another commercial activity that he has performed, passporting according to MiCA may be inadmissible. Applications for MiCA Passporting will therefore need to be prepared with the utmost care.