CASP transitory period for VASP under MICAR

Regulation on markets in crypto assets (MiCA) entered into force in June 2023 (see our MiCA knowledge base). The impact has been so far limited. This changes starting from 30 December 2024 when MiCA finally applies with no need for local legislation to enable it.

MiCA essentially requires that every provider of crypto-asset services (wallets, exchange, transfers, advice, etc.) addressed to the EU territory is authorized by national competent authority starting from 2025 (see our guide on licensing of CASP and DLK’s support).

An exception has been provided for existing providers of MiCA services. This includes mostly existing VASPs, registered or licensed nationally as envisaged by the EU AML legislation. They benefit from transitory period. Essentially a VASP lawfully providing services before 30 December 2024 may continue to do so until 1 July 2026 or until they are granted or refused MiCA authorization, whichever is sooner. Note that the trigger is actual provision of services, not mere registration or license.

Member States may modify MiCA’s transitory regime. This requires however that local legislation is adopted. If Member State is silent, then MiCA’s deadline is decisive. Poland has indicated the intent to modify MiCA’s transitory period but the final arrangements are still uncertain. Judging by past developments in non-bank licensing (payment, e-money, crowdfunding) Poland is likely to adopt the solution whereby existing VASPs can continue providing services if they apply for authorization before specific deadline (entry into force of Polish legislation or MiCA’s deadline) until they are granted or refused authorization.

In any case, VASP benefiting from transitory period have no access to MiCA’s EU passport until and unless they are authorized. Therefore, VASPs in this period are allowed to offer their services only in the jurisdiction of their VASP registration/authorization. Note that some EU Member States have opted for accepting in their territories services of VASPs registered or licensed in other markets. In such case a VASP that benefits from transitory period in their home market may continue providing services in those Member States (check again whether the trigger is actual provision of services or mere registration, or license is sufficient).

Judging by experience with other non-bank licenses the proceedings before competent authorities can last from several months (best case scenario) up to one year or even more.  This is highly dependent upon the scope of services included in the application. Note that if you apply for narrow scope of services and are authorized accordingly, expanding the business will require to extension of authorization which will take same time as initial authorization.

If you provide VASP services – consider launching early preparation for authorization as a CASP. With current uncertainty around transitory periods failure to be among first providers to apply for authorization may lead to unexpected termination of services in the EU. In any case you will face comparative advantage of competitors providing services throughout entire EU soon after their CASP license is in place.

Preparing CASP application is a complex and lengthy process. It goes far beyond paperwork. Translating your existing services into MiCA language is the first challenge. Others are often hidden in MiCA Level-2 acts. Did you know that as part of your application you need to demonstrate a cyber security audit report or the results of penetration test (fortunately not necessarily a TLPT)? Or that in some scenarios transfers of cryptoassets requires not only CASP license but authorization to provide payment services on top of it? At DLK Legal, we are already in the process of preparing several applications for MICA authorization and have all requirements mapped in tiniest details.