Application of TFR to VASPs

We advised the provider operating a trading platform for crypto-assets on a project:

LEGAL OPINION ON THE APPLICATION OF TFR REGULATION TO VASP BENEFITING FROM MICA’S GRANDFATHERING PERIOD

From 30 December 2024, Regulation 2023/1114 on markets in crypto-assets (MiCA) becomes fully applicable. From that date, the provision of crypto-asset services within the EU requires the status of a crypto-asset service provider (CASP). At the same time, MiCA introduces a transitional period, allowing entities that provided crypto-asset services before this date to continue operating under the current rules. This period ends on 1 July 2026, although Member States may shorten it or waive it altogether. Entities providing crypto-assets services during the transitional period do not have CASP status under MiCA.

On the same day, Regulation 2023/1113 on information accompanying transfers of funds and certain crypto-assets (TFR / ToF) becomes applicable, which imposes obligations to collect and transmit information on the originators and beneficiaries of crypto-assets transfers. The obligations in TFR are addressed to CASPs as defined in MiCA, which raises questions about their application to VASPs benefiting from the transitional period that do not have CASP status. The position that TFR obligations are also addressed to VASPs has been expressed by the European Banking Authority (EBA), the European Securities and Markets Authority (ESMA) and the national authorities responsible for AML / CTF supervision in various Member States. This approach is not justified by the wording of the legislation.

DLK’s assistance included:

• an analysis of the application of TFR Regulation to a non-CASP virtual currency service provider operating under the transitional period established in MiCA
• an analysis of the permissibility of processing of personal data for the purposes of complying with obligations arising from TFR by VASP
• providing practical recommendations as to what action VASP should take if it decides not to comply with the TFR requirements