CASP vs VASP Licenses under MiCA in the EU

The European Union’s Markets in Crypto-Assets Regulation (MiCA) represents a landmark shift in how crypto-assets are regulated across its member states. It sets a comprehensive framework designed to regulate crypto-assets and services, balancing innovation with financial stability and investor protection. As we enter October 2024, the final phases of implementation are unfolding, and businesses will need to understand how this affects them.

CASP vs. VASP: What’s the Difference?

Under MiCA, the regulatory landscape distinguishes between Crypto-Asset Service Providers (CASPs) and Virtual Asset Service Providers (VASPs). Historically, VASPs operated under the scope of Anti-Money Laundering (AML) directives, but MiCA expands beyond AML to cover a wider array of activities.

VASPs typically handle services such as crypto-to-fiat exchanges, crypto wallets, and custody of crypto assets, operating under basic AML registration requirements. CASPs, however, face more rigorous regulations under MiCA. They are required to meet higher standards concerning transparency, consumer protection, and financial conduct.

MiCA ’s Implementation Timeline

MiCA was initially proposed in 2020, and its full application is scheduled for 2024–2025. Starting from December 2024, businesses offering crypto-related services must be fully compliant with MiCA regulations. Certain provisions, such as those concerning e-money tokens (EMTs) and asset-referenced tokens (ARTs), are already in force.

Capital Requirements and Impact on Businesses

The MiCA regulations impose minimum capital requirements for CASPs. Depending on the type of service, businesses must have a minimum level of own funds. For example, trading platform operators or custodial services may need a capital base of up to €150,000, while less risk-intensive services could face smaller requirements.

This shift affects existing crypto businesses, particularly in countries like Poland and Romania, where regulations have historically been lenient. Previously, registering as a VASP mainly required compliance with AML laws, but under MiCA, companies in these regions will need to apply for CASP licensing and comply with stricter regulations. This adds to operational costs, but also provides new opportunities as licensed CASPs can offer services throughout the EU via a single license, enabling them to access a market of over 450 million potential customers.

Countries like Lithuania and Malta, which have been favorable to crypto companies due to minimal regulatory burdens, will see a more stringent regulatory environment. Startups and smaller businesses will have to adapt to MiCA ’s prudential safeguards, such as insurance and capital buffers, to protect against risks.

Country-Specific Changes

Different EU countries have various approaches to implementing MiCA:

• Germany, France, and Italy have already integrated parts of MiCA ’s provisions into their national frameworks, providing a more seamless transition for crypto companies.
• Spain and the Czech Republic will experience a regulatory overhaul, as they move from lighter touch regulations to stricter supervision under MiCA.
• Cyprus and Malta, known as crypto-friendly hubs, may witness consolidation in their crypto markets, as only compliant businesses can maintain operations.
• As Romania transitions to the stricter regulatory frameworks required by MiCA, this shift may challenge smaller crypto businesses. However, this transformation is an opportunity to strengthen consumer trust and align with European standards.

We at COINsiglieri , with over 7 years of experience in crypto and blockchain compliance, together with our partners from Lexters and our Ecosystem, are committed to supporting this evolution. We offer our complimentary expertise to help AUTORITATEA DE SUPRAVEGHERE FINANCIAR? draft effective frameworks and legislation.

Our vision goes beyond just compliance; we aim to help build a business-oriented legislative framework that not only attracts startups but actively supports and encourages them to incorporate in Romania. We believe in creating a preventive regulatory approach—one that offers guidance and support from the very beginning to avoid problems before they arise, rather than relying on punitive measures like fines or excessive controls. By working together, we can ensure that Romania becomes a hub for innovation in the crypto space, known for progressive and startup-friendly regulations that inspire confidence rather than confusion or deterrence. We invite ASF to collaborate with us in creating this forward-thinking framework that will boost Romania’s appeal in the global crypto landscape.

The Bottom Line

1. Scope of Services Regulated

• CASP regulates a broader range of activities, including custody, trading platforms, issuance, and exchange of crypto-assets. It also covers e-money tokens (EMTs) and asset-referenced tokens (ARTs), making it more comprehensive.
• VASP: Primarily focused on AML (Anti-Money Laundering) requirements for crypto exchanges and wallet providers, with less coverage for other activities like crypto issuance or broader financial services.

2. Consumer Protection and Liability

• CASP: MiCA imposes higher consumer protection standards on CASPs. They are liable for the loss of customer assets and must disclose operational risks, making them more accountable to investors.
• VASP: Under previous regimes, VASP registration focused mostly on AML compliance, with limited investor protection mechanisms and no specific liability for asset loss.

3. Capital and Prudential Requirements

• CASP: MiCA introduces prudential safeguards, including minimum capital requirements (up to €150,000), insurance, and specific risk buffers depending on the service offered (e.g., custodial services or platform operation).
• VASP: Historically, VASP registration did not involve specific capital requirements beyond general compliance with AML frameworks.

4. Cross-border Operations

• CASP: CASP licensing under MiCA enables passporting rights, allowing businesses to operate across all EU member states with a single license. This significantly reduces the complexity of complying with multiple jurisdictions.
• VASP: VASP registration was more country-specific, with companies needing to comply with different national regulations and reapply for licenses across borders.

5. Transparency and Disclosure Obligations

• CASP: MiCA mandates continuous transparency and disclosure, including information about token circulation, reserve composition (for ARTs), and environmental impact.
• VASP: Under previous regimes, disclosure requirements were minimal, mostly revolving around reporting suspicious activities under AML laws, without detailed public-facing transparency.

MiCA sets a unified regulatory standard across Europe, significantly impacting the capital and compliance obligations of CASPs compared to VASPs. It pushes businesses toward a more regulated, transparent environment, which, while initially increasing costs, can open doors to cross-border opportunities within the EU. Crypto startups need to evaluate the benefits of operating under a single license and prepare for more consumer protection measures and financial disclosures.

MiCA is a step forward for standardizing crypto regulations across Europe, and businesses that comply will gain access to a larger market while operating under a more secure and regulated framework.

I provide this article for informational purposes only, reflecting my personal interpretation of the MiCA legislation. It should not be taken as legal advice.

Ionut Vilceanu - COINsiglieri.com