As Ireland transitions from the Virtual Asset Service Provider (VASP) framework to a Crypto Asset Service Provider (CASP) regime under the EU’s Markets in Crypto Assets Regulation (MiCA), there are significant implications for governance, particularly for Independent Non-Executive Directors (INEDs) on the boards of VASPs. Senior leaders and boards must be proactive in preparing for these changes to ensure compliance and effective oversight.
Under the CASP regime, governance standards will increase, especially concerning board composition. INEDs will play a critical role in ensuring proper governance and risk management. Key responsibilities will include:
- Oversight of Compliance: INEDs will need to ensure that their firms are not only compliant with MiCA regulations but also that they have robust internal controls to manage risk, including money laundering and cybersecurity threats.
- Risk Management: Boards will be required to implement stringent risk frameworks to address the unique risks of digital assets, including volatility, cybersecurity, and operational risks. INEDs will need to lead efforts in monitoring and updating these frameworks regularly.
- Diversity of Expertise: CASP regulations emphasize the need for boards to have a diverse set of skills, including financial services, legal compliance, and digital asset expertise. Boards should begin evaluating gaps in their current makeup, particularly around technology and digital innovation, to ensure they are prepared for MiCA’s implementation.
- Regulatory Knowledge: INEDs must be well-versed in the regulatory landscape for crypto-assets, not just in Ireland but across the EU. This includes understanding MiCA’s requirements, such as licensing, capital requirements, and ongoing compliance obligations.
- Cybersecurity and Operational Resilience: As digital operational resilience becomes a priority under regulations like the Digital Operational Resilience Act (DORA), INEDs will be critical in overseeing cybersecurity strategies and ensuring operational continuity in the face of potential disruptions
- Independence and Objectivity: CASP regulations place a premium on the independence of board members, making the role of INEDs even more significant. They will need to exercise objective judgment, particularly in assessing conflicts of interest, related-party transactions, and the overall risk profile of the business.
- Review Board Composition: Now is the time for boards to assess whether they have the right balance of skills and independence. With increased focus on governance under MiCA, adding INEDs with deep expertise in compliance, digital assets, and risk management is crucial.
- Develop a CASP Readiness Plan: Boards should be actively working on a CASP transition plan, ensuring they meet all the licensing and regulatory requirements under MiCA. This includes preparing for enhanced supervisory oversight by the Central Bank of Ireland and other EU regulators
- Focus on Continuous Education: Boards and INEDs should commit to ongoing education on evolving regulatory changes and the broader crypto-asset landscape. This will not only ensure compliance but also equip them to steer their firms strategically as the industry evolves.
The shift to a CASP regime will bring higher expectations for governance and risk oversight for VASPs in Ireland. Senior leaders and boards must start preparing now by assessing board composition, strengthening risk management frameworks, and ensuring their INEDs are well-equipped to meet the new regulatory demands.
