MiCA is now live: the paradigm shift is ongoing

On 30 December 2024, MiCA¹ became fully applicable across the European Union (“EU”). This represents a major step in the tiered deployment of MiCA, following its entry into force on 29 June 2023 and the entry into application of Titles III and IV relating to the authorisation and supervision of asset-referenced and e-money tokens on 30 June 2024.

As a reminder, MiCA establishes a harmonised framework for crypto-assets, aiming at supporting innovation, introducing consumer and investor protection and market integrity, as well as ensuring financial stability. The full application of MiCA has a number of legal consequences for entities offering crypto-assets and/or services relating to crypto-assets. We have summarised below the key implications and the state of implementation of MiCA.

1. Implications of the full application of MiCA for in-scope entities

The full application of MiCA represents a paradigm shift for entities offering crypto-assets and/or services relating to crypto-assets. In short: 

• Entities offering services relating to crypto-assets such as custody and administration, operation of a trading platform, exchange, execution of orders, placement, reception and transmission of orders, advice, portfolio management and transfer services must now obtain an authorisation/license from the Commission de Surveillance du Secteur Financier (“CSSF”) to conduct these activities. This involves meeting specific requirements, including central administration and capital adequacy requirements, outsourcing and governance standards and compliance with market abuse and anti-money laundering (AML) regulations as well as IT security requirements. Upon authorisation, crypto-asset service providers (“CASPs”) will benefit from a European passport regime allowing the provision of services throughout the EU.
• Issuers of crypto-assets other than asset-referenced tokens or e-money tokens are now required to notify their crypto-asset white paper to the competent authority. This document outlining general information on the issuer, the characteristics, rights, obligations and risks associated with the crypto-assets must be submitted to the CSSF and made publicly available to ensure transparency and informed decision-making by investors.
• Entities already operating under existing national law/regulations benefit from a grandfathering period. Thus, entities registered in Luxembourg as virtual asset service providers (“VASPs”) can continue to provide services relating to crypto-assets in Luxembourg until 1 July 2026. This enables a smooth transition from the VASPs to the CASPs regime.  

2. State of implementation of MiCA

Since our latest newsflash on MiCA², the European Commission and the European Supervisory Authorities (“ESAs”) have published several Level 2 and Level 3 reports/measures, which aim at ensuring the practical implementation of MiCA.

In this context, the following are notable:

• ESMA Final Report on the Guidelines on the conditions and criteria for the qualification of crypto-assets as financial instruments;
• ESAs Final Report on the Guidelines on templates for explanations and opinions, and the standardised test for the classification of crypto-assets;
• ESMA Final Report on the Draft technical Standards specifying certain requirements in relation to the detection and prevention of market abuse under MiCA;
• ESMA Final Report on the Guidelines specifying Union standards on the maintenance of systems and security access protocols for offerors and persons seeking admission to trading of crypto-assets other than asset-referenced tokens and e-money tokens; 
• ESMA Final Report on the Guidelines on reverse solicitation under MiCA;
• ESMA Final Report on the Guidelines specifying certain requirements of MiCA on investor protection – third package; 
• EBA Decision concerning the Procedure for the classification of asset-referenced tokens and e-money tokens as significant and the transfer of supervisory powers and reporting on those tokens following the classification as significant under MiCA;
• EBA Final Report on the Guidelines on redemption plans under Articles 47 and 55 of MiCA; and
• Publication and adoption of Level 2 and Level 3 measures on a variety of subjects, including remuneration policy, own funds and reporting requirements. 

3. How to prepare

Engaging with legal professionals experienced in financial regulation and crypto-assets is crucial to navigate the complexities of MiCA and to ensure seamless compliance within the Luxembourg and the European legal and regulatory frameworks. 

Should you have any question with respect to MiCA, please feel free to contact our specialists. Amongst other things, we can assist with the following: 

• Assess and analyse from a regulatory perspective whether your activities fall within the scope of MiCA and determine the specific legal qualification and obligations that apply to your operations. 
• Guide you through the authorisation procedure with the CSSF, assisting in the preparation of necessary documentations and ensuring that the application file is complete. 
• Help you to establish policies and procedures to adhere to MiCA’s standards, including AML/CFT measures, developing and implementing robust compliance frameworks and governance structures. 
• Review and/or draft contracts and white papers to ensure that they align with MiCA’s provisions. 
• Provide continuous legal support in monitoring regulatory developments, ensuring that your entity remains compliant as the regulatory landscape evolves.