How will MiCA transform the traditional financial market?

As of December 30 2024, MiCA (the Markets in Crypto-Assets Regulation) officially comes into application, marking a pivotal moment for the European financial ecosystem. While much of the discussion has centered on its impact on crypto-asset service providers (CASPs), it raises an important question: Will it be a game changer for the traditional financial industry?

Beyond CASPs: MiCA’s ripple effects on banks and financial institutions as a whole.

The regulation primarily targets CASPs and specific types of crypto-assets offering, setting comprehensive rules for their operations, licensing, and consumer protection. However, its implications extend far beyond this niche. Traditional financial institutions, such as banks, might find themselves affected.

Most asked questions in December 2024.

In this article, i will explore the most asked question of this end of the year such as

• Do a financial entity need a MiCA license?
• Do a financial entity need to comply with specific MiCA requirements?
• Can a European bank offer services related to crypto-assets?

Can a Belgian bank offer crypto-related services* under MiCA?

Imagine a Belgian bank decides to offer crypto-related services, such as bitcoin custody or transfer, starting today. Would it be possible under MiCA?

Absolutely.

Authorized financial institutions—like credit institutions, central securities depositories, investment firms, market operators, electronic money institutions, UCITS management companies, or alternative investment fund managers—are permitted to provide crypto-asset services under MiCA.

The question who and which country will take the lead?

*crypto-related servies include: Providing custody and administration of crypto-assets on behalf of clients, operation of a trading platform for crypto-assets, Exchange of crypto-assets for funds, Exchange of crypto-assets for other crypto-assets, Execution of orders for crypto-assets on behalf of clients, placing of crypto-asset, reception and transmission of orders for crypto-assets on behalf of clients, providing advice on crypto-assets, providing portfolio management on crypto-assets and providing transfer services for crypto-assets on behalf of clients.

Does the bank need a MiCA license?

No.

Banks and other authorized financial institutions don’t require separate MiCA authorization. Instead, they must simply submit a notification to the national competent authority 40 working days before launching crypto-asset services.

?? Fun fact: Belgium has yet to designate its national competent authority for MiCA compliance.

Does an authorised financial institution allowed to offer any crypto-related services?

No.

Different entities have specified conditions for engaging in crypto-asset services:

• Credit institutions: May provide any crypto-asset services.
• Central Securities Depositories (CSDs): Limited to custody and administration of crypto-assets, deemed equivalent to securities account operations.
• Investment firms: Services must align with their MiFID II authorization, covering services such as custody, trading, and portfolio management of crypto-assets.
• Electronic Money Institutions (EMIs): Restricted to custody and transfer of crypto-assets related to e-money tokens they issue.
• UCITS management companies and AIFMs: May provide crypto-asset services equivalent to portfolio management and other non-core services for which they are already authorized.

Here is a list of financial institutions being allowed to provide certain crypto-related services under specific existing authorisations:

Does a Belgian bank need to comply with some MiCA specific requirements before notifying their competent authority?

Yes.

Before being able to offer services under MiCA, the financial entity has a compliance check-list to provide, which include:

• a programme of operations setting out the types of crypto-asset services that the applicant crypto-asset service provider intends to provide, including where and how those services are to be marketed.
• a description of the internal control mechanisms, policies and procedures to ensure compliance with the provisions of national law transposing #AMLD4.
• the risk assessment framework for the management of money laundering and terrorist financing risks.
• the business continuity plan.
• the technical documentation of the ICT systems and security arrangements, and a description thereof in non technical language.
• a description of the procedure for the segregation of clients’ crypto-assets and funds;
• a description of the custody and administration policy, where applicable.
• a description of the operating rules of the trading platform and of the procedures and system to detect market abuse, where applicable.
• a description of the non-discriminatory commercial policy governing the relationship with clients as well as a description of the methodology for determining the price of the crypto-assets they propose to exchange for funds or other crypto-assets, where applicable.
• a description of the execution policy, where applicable.
• evidence that the natural persons giving advice on behalf of the applicant crypto-asset service provider or managing portfolios on behalf of the applicant crypto-asset service provider have the necessary knowledge and expertise to fulfil their obligations, where applicable.
• whether the crypto-asset service relates to asset-referenced tokens, e-money tokens or other crypto-assets.
• information on the manner in which such transfer services will be provided, where applicable.

What happens after the bank notifies its national competent authority?

An assessment by competent authority within 20 working days.

Upon receiving the notification, the competent authority has a responsibility to assess whether all the necessary information has been provided within 20 working days. If the authority finds that the notification is incomplete, it will inform the entity and set a deadline for providing the missing information. This process ensures that the competent authority has a clear understanding of the crypto-asset service provider's operations and safeguards the interests of investors and the integrity of the financial system.

What about if a bank want to offer crypto-assets such as Asset-Referenced Tokens (ARTs) or Electronic Money Tokens (EMTs)?

Please, refer to my previous article on the topic.

Conclusion

Will MiCA boost the industry by offering the opportunity to financial institutions to be part of the game?

Which traditional financial institution and which EU countries will take the lead and offer crypto-related services?

Will it have an impact on #BTC price?

As MiCA comes into play, its broader impact on the financial landscape remains to be seen. What is clear, however, is that this regulation is not just about crypto—it’s about shaping the future of finance. Traditional institutions must evaluate their strategies to align with this evolving regulatory environment.

One thing for sure 2025 promise to be interesting.

?? Your MiCA guide for CASPs.

?? More questions on the MiCA notification requirements? Contact me directly.