The harmonisation of European financial services law for cryptocurrencies is approaching with great strides, or is it? As per the provisions of the Market in Crypto-Asset Regulation (MiCA), the regulation will generally apply from 30 December 2024. However, MiCA contains certain facilitations for existing crypto-asset service providers that largely depend on the member states’ discretion:
A grandfathering clause (Art. 143(3) MiCA) provides a limited period of protection for crypto-asset service providers operating under existing legislation.
Crypto-asset service providers that provided their services in accordance with applicable national law before 30 December 2024 may continue to do so until 1 July 2026. However, member states may derogate from that rule (by not applying this transitional regime at all or reducing its duration) if they consider that their national regulatory framework is less strict than MiCA and inform the European Commission and ESMA until 30 June 2024 about their choice.
Some members of the European Union may wish to maintain the maximum transition period in order to avoid placing their domestic crypto-asset service providers at a competitive disadvantage. In contrary, the optimal result (a harmonised market with a high level of investor protection) could be better achieved if MiCA was implemented as soon as possible in all member states. Accordingly, ESMA has encouraged member states to limit the transitional period to a maximum of twelve months, in particular for entities that have not been “through a fully-fledged authorisation process” (see our blogpost).
ESMA also clarified that reliance on the transitional period does not enable the crypto-asset service provider to use the MiCA passport (ESMA_QA_2086). Outside MiCA, the cross-border provision of crypto-asset services is only permissible where home and host state permit doing so under the transitional regime.
MiCA also allows for the introduction of simplified procedures (Art. 143(6) MiCA) for applications for authorisation as MiCA crypto-asset service providers submitted until 1 July 2026 by entities that were, as of 30 December 2024, authorised under national law to provide crypto-asset services.
The following gives a brief overview of how selected member states have exercised their options.
Germany
According to a draft law, Germany currently considers to shorten the grandfathering period until 31 December 2025. The transitional regime will apply to credit and financial services institutions (incl. crypto-custodians), investment firms, e-money institutions, regulated exchanges, and UCIT and AIF managers (for their ancillary services), insofar they were permitted to undertake the respective activities in relation to crypto-assets. For instance, a German investment firm that provided investment advice under its MiFID license was already automatically licensed to provide the same service in relation to crypto-assets as well. This investment firm may rely on the transitional regime – or go through the ex-ante notification process in Art. 60 MiCA to also make use of the European passport.
Furthermore, Germany will enact a simplified authorisation procedure for certain regulated entities that are neither credit institutions nor investment firms in the meaning of MiCA and therefore cannot use the ex-ante notification process in Art. 60 MiCA. This will mainly concern entities that are only licensed for cryptocustody or firms whose license for trading activities is limited to trading in crypto-assets (cf. Sec. 32(2a) of the German Banking Act, KWG). However, also other entities licensed under Sec. 32 KWG or, potentially, Section 15 of the Investment Firm Act (WpIG) may apply under a simplified licensing procedure.
A delegated order is currently under consultation, which specifies the content of the simplified authorisation application and procedural aspects, but also clarifies that a simplified authorisation procedure can only be used if the party is already licensed for the respective MiCA crypto-asset service under national law. For instance, a German crypto-custodian may not apply for a license for the operation of a crypto-asset trading platform through a simplified authorisation procedure.
France
Overview of the existing French PSAN regime
In France, since the entry into force of Law No. 2019-486 of 22 May 2019 on business growth and transformation (PACTE Law), the provision of digital asset services has been subject to a dual regime: mandatory registration with, or optional licence by, the French financial market authority – the Autorité des marchés financiers (AMF), as a digital asset service provider (PSAN).
The French legislator (in March 2023) and the AMF (in July 2023) have strengthened, from 1 January 2024, the requirements applicable to PSANs subject to mandatory registration that had not lodged a complete registration application with the AMF before 1 July 2023 by subjecting them to certain requirements applicable to licensed PSANs (the so-called Strengthened Registration Regime).
PSANs subject to mandatory registration that were already registered with the AMF or had lodged a complete registration application with the AMF before 1 July 2023 are however not subject to these strengthened requirements and remain subject to the requirements formerly applicable to registered PSANs (the so-called Simple Registration Regime), unless they later decide to extend their existing registration to a new digital asset service (in which case, they would be subject to the Strengthened Registration Regime for all the digital asset services for which they are registered).
By exception, service providers only providing digital asset RTO, portfolio asset management, advisory, underwriting and/or placing services in France without engaging in any form of financial solicitation (démarchage) and/or aggressive marketing behaviour to market such services are authorised to operate in France on a non-regulated basis (i.e., without being registered or licensed as PSANs) (the Non-Regulated Firms).
France’s position on the MiCA grandfathering clause
In March 2023, the French legislator opted to apply the MiCA grandfathering clause for the full 18-month transitional period and to the benefit of all registered PSANs (whether subject to the Simple Registration Regime or the Strengthened Registration Regime), licensed PSANs and Non-Regulated Firms. PSANs registered or licensed in France, and Non-Regulated Firms operating in France, before 30 December 2024 will therefore be able to continue operating as such until 1 July 2026 without having to be licensed as CASPs. Consequently, the French PSAN regime will coexist with the MiCA CASP regime until the end of the 18-month transitional period. Both registered/licensed PSANs and Non-Regulated Firms will not be authorised to rely on the MiCA European passport to provide digital asset services into other EU/EEA Member States during this transitional period until they are duly licensed as CASPs.
Despite ESMA’s encouragements to limit the 18-month transitional period to a maximum of 12 months for the application of the MiCA grandfathering clause, France, unlike Germany, has not yet decided to shorten it. France’s position may evolve in the coming months since, in April 2024, the French Parliament authorised the French Government to adopt by ordinance, within a period of six months, the legal provisions necessary to adapt French law to the entry into force of MiCA. The expectation is however that this ordinance will not be adopted before September/October 2024.
France’s position on the MiCA simplified licensing procedure
In a press release dated 21 April 2023, the AMF announced that it would consider whether it should enact a simplified (or fast-track) licensing procedure to facilitate the transition from the PSAN status under the French regime to the CASP status under MiCA, in accordance with Article 143(6) of MiCA. In July 2023, the AMF amended its General Regulation as well as its guidelines applicable to PSANs to align, from 1 January 2024, the requirements applicable to licensed PSANs and registered PSANs subject to the Strengthened Registration Regime with those that will be applicable to CASPs under MiCA. In a press release dated 10 August 2023, the AMF explained that this alignment allows the implementation of a simplified licensing procedure to facilitate the transition to the CASP status under MiCA.
We note however that, at this stage, no formal simplified licensing procedure in accordance with Article 143(6) of MiCA has been enacted under French law or the AMF guidelines. Furthermore, in practice, the abovementioned alignment may not necessarily ease the transition from the PSAN status to the CASP status as expected since this would only concern a limited number of PSANs. Indeed, as at the date hereof, only one service provider (i.e., Société Générale - Forge) has been licensed as a PSAN (noting that, as at 31 December 2023, more than 10 PSAN optional licence application were being reviewed by the AMF) and most registered PSANs are subject to the Simple Registration Regime (only one service provider has been registered as a PSAN since 1 January 2024 and it is not possible to confirm at this stage whether it is subject to the Simple Registration Regime or the Strengthened Registration Regime).
France’s position (and, in particular, AMF’s position) on that topic may however still evolve in the coming months, since a more formal simplified licensing procedure could still be adopted under the forthcoming ordinance to adapt French law to the entry into force of MiCA (please see above).
In the meantime, the President of the AMF publicly announced on 23 May 2024 that service providers which seek to be licensed as CASPs on 30 December 2024 (i.e., MiCA application date) will be allowed to file their licensing applications with the AMF from 30 June 2024.
Austria
In Austria, a draft law (see Ministerialentwurf and Initiativantrag) is currently in the legislative process which, if adopted, would shorten the grandfathering period until 31 December 2025. This transitional regime would apply to registered virtual asset service providers (VASPs) providing services in accordance with Sec. 2(22) of the Austrian Financial Market AML Act (FM-GwG). Accordingly, VASPs registered before the end of 2024 could continue operating until the end of next year – unless they are granted or refused an authorisation pursuant to Art. 63 MiCA before this point in time.
The legislative materials state as background that Austria does not have a regulatory regime for VASPs which would be comparable to that of MiCA, given that the FM-GwG only covers a narrower scope of crypto-asset services than MiCA and is limited to AML aspects. Therefore, in line with ESMA’s guidance letter, a shorter grandfathering period is suggested.
Based on the draft law, Austria would not introduce any simplified authorisation procedure by way of derogation from MiCA.
Belgium
In Belgium, VASPs are currently regulated in the framework of the anti-money laundering rules. The anti-money laundering rules require, amongst other things, the registration of VASPs. We note that no VASPs are currently registered in Belgium. In 2023, the Belgian regulator (the FSMA) has also issued a regulation restricting the marketing of crypto-assets in Belgium.
There is no public information available with regard to Belgian approach towards the options under the grandfathering clause and the simplified authorisation procedure as set out in the MiCA. We note that this will likely not be relevant for Belgian VASPs as there are none and this will likely not change before the end of this year.
Netherlands
In the Netherlands, it is envisaged under a draft implementing act (and subsequent implementation decision) that the transition period for virtual asset service providers that are registered with the Dutch Central Bank (de Nederlandsche Bank) under the Dutch Money Laundering and Terrorist Financing (Prevention) Act (Wet ter voorkoming van witwassen en financieren van terrorisme, Wwft) (VASPs) will be shortened to 1 July 2025. Consequently, as per that date all crypto-asset service providers (as defined in MiCA) will need to have obtained authorisation under MiCA to be able to provide their services in the Netherlands. This includes VASPs that are based in other EU member states and are currently authorised to provide their virtual asset services under the Wwft on a cross-border basis into the Netherlands.
With this relatively short transition period for registered VASPs, the Dutch legislator aims to ensure a level playing field for supervision on crypto-asset services in the Netherlands, specifically given that under the Wwft VASPs are not subject to requirements relating to consumer protection, prudential supervision and market abuse prevention rules.
Under the draft law, no simplified authorisation procedure for authorising crypto-asset service providers is envisaged by the Dutch legislator. The Dutch financial markets authority (Autoriteit Financiële Markten) accepts applications for an authorisation or registration as crypto-asset service provider from 22 April 2024.
Italy
According to a draft of the Italian legislative decree implementing MiCA (the Draft Decree), the transitional regime should apply to any legal entity which satisfies the following conditions:
- as at 27 December 2024, it is enrolled with the competent register kept by OAM (Organismo Agenti e Mediatori) and registered as a virtual asset services provider (VASP); and
- by 30 December 2024, it has submitted to the Bank of Italy and CONSOB (jointly) a request to be authorized to act as crypto asset services provider (CASP). If the authorisation request under this item (2.) is denied, the relevant entity shall terminate any relationships with its Italian clients within 60 days from the date on which the request is denied.
According to the Draft Decree, the transitional regime, to the extent approved by the Italian legislator, will be effective until the earliest of: (A) 30 October 2025 and (B) the date on which the relevant entity has obtained (or has been refused) the authorisation to act as CASP.
Based on the Draft Decree, the Italian legislator has not opted for a simplified authorisation procedure.
