This post is an update of our previous post published on June 21, 2024.
The harmonisation of European financial services law for cryptocurrencies is approaching with great strides. As per the provisions of the Markets 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 were able to 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.
While ESMA had 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), not all member states have decided to follow that suggested approach. In the List of grandfathering periods decided by Member States published by ESMA, the transition periods range from 5 to 18 months.
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 (i.e. where applicable national law in both states has allowed for this option so far and continues to allow it during the transition period).
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 those options.
Germany
Following the approval of the Financial Market Digitalization Act (FinMaDiG) by both the German Parliament (Bundestag) and the Federal Council (Bundesrat) on 18 December 2024 and 20 December 2024, respectively, the necessary preparations to apply and enforce MiCA have been finalised. The recent dissolution of the governing coalition had raised doubts about the timely adoption of the FinMaDiG by the Bundestag, a concern that has now been resolved. Germany is now implementing MiCAR mainly through a separate Act on the Supervision of Markets for Crypto Assets (‘Kryptomärkteaufsichtsgesetz – KMAG’). According to the legislative decision, Germany shortens the grandfathering period until 31 December 2025 (§ 50 (2) No. 3 KMAG). 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 enacts 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 (§ 50 (3) KMAG). 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.
Austria
In Austria, a law has been adopted which shortens the grandfathering period until 31 December 2025. This transitional regime applies to registered virtual asset service providers (VASPs) within the meaning of Sec. 2(22) of the Austrian Financial Market AML Act (FM-GwG). Accordingly, VASPs registered before the end of 2024 can 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’s regulatory regime for VASPs is not 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 has been introduced.
Austria has not introduced any simplified authorisation procedure by way of derogation from MiCA.
Austria’s Financial Market Authority has published comprehensive information on MiCA, including a roadmap for crypto-asset service providers and guidance for applicants for an authorisation under MiCA, such as a publication of more than 160 pages providing information on applications.
Belgium
In Belgium, VASPs were regulated in the framework of the anti-money laundering rules. The anti-money laundering rules required, amongst other things, the registration of VASPs. 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. This will not be relevant for Belgian VASPs as there are none.
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. The legislative process is still ongoing. The House of Representatives (Tweede Kamer) has adopted the draft law on 26th November.
Italy
According to the Italian legislative decree No. 129 of 5 September 2024 implementing MiCA (the Decree), the transitional regime applies 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 2025, 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 (ii) 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 Decree, the transitional regime will be effective until the earliest of: (A) 30 December 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 Decree, the Italian legislator has not opted for a simplified authorisation procedure.
