The crypto industry is currently in a consolidation phase. With increasing regulation and an increasingly harsh general economic environment, some market leaders of the past are running into difficulties, while new players and institutions from the traditional financial world are positioning themselves for succession. Established financial institutions in particular are currently looking for ways to position themselves for the crypto market and the field of tokenization. One obvious opportunity here is the acquisition of an existing crypto asset service provider. The acquisition of a crypto asset service provider is regulated in Germany under the German Banking Act (KWG) and the German Investment Firm Act (WpIG) and is subject to a mandatory and successful acquisition approval procedure at BaFin, in which the authority must approve the acquisition by the interested acquirer. Also in case of an increase of a shareholding in a crypto asset service provider resulting in a shareholding of more than 20% or 50%, an acquisition approval procedure at BaFin has to be conducted. In the future, there will be EU-wide regulations in the Markets in CryptoAssets Regulation (MiCAR) for shareholdings in a crypto asset service provider. But how will the acquisition approval procedure work under MiCAR?

BaFin Must Evaluate Planned Acquisition in MiCAR Acquisition Approval Proceedings

The regulations on the takeover of a crypto asset service provider regulated under MiCAR will come into force on December 30, 2024. At that point, the competent supervisory authority – in Germany, BaFin – will have to assess whether there are any reasons opposing the takeover in an acquisition approval procedure prior to any planned takeover. The acquisition approval procedure under MiCAR will have to be conducted if the interested acquirer would hold a stake of more than 20, 30 or 50% of the capital or voting rights in the crypto asset service provider after a planned takeover. The acquisition approval procedure is initiated by the interested acquirer, who is obliged to notify BaFin in writing. However, the seller of shares is also subject to a notification obligation if his shareholding in the capital or voting rights would fall below the threshold of 10, 20, 30 or 50% as a result of the planned sale. BaFin will have 60 working days from receipt of acknowledgement to assess the planned acquisition. In the MiCAR acquisition approval procedure, BaFin may consult the Financial Intelligence Unit (FIU) responsible for processing suspicious money laundering reports to verify whether the planned acquisition could raise concerns under money laundering prevention law.

What Information Must be Submitted to BaFin for an Acquisition Approval Procedure Pursuant to MiCAR?

MiCAR does not explicitly regulate which specific information and documentation have to be submitted to BaFin within the scope of the acquisition approval procedure under MiCAR. Rather, MiCAR obliges ESMA to develop regulatory technical standards in which the documents and evidence to be submitted are to be specified. It can be assumed that, in addition to the requirement for CVs, certificates of good conduct and other evidence documenting the reliability of the acquirer and the persons behind it, descriptions of the acquirer’s current and future business activities and information on its financial situation will also have to be submitted. In any case, however, in accordance with the provisions of MiCAR, it will be necessary for the competent authority to verify in the aquisition approval procedure whether the interested acquirer is reliable and whether the persons actually managing the crypto asset service provider’s business are professionally suitable. The subject of the examination will be, in particular, whether the crypto asset service provider is likely to be able to fulfill all regulatory obligations under MiCAR even after the proposed acquisition. In cases where there is sufficient suspicion that the planned takeover is for money laundering or terrorist financing purposes, the competent authority will not be able to approve the takeover.

Attorney Lutz Auffenberg, LL.M. (London)

I.  https://fin-law.de

E. info@fin-law.de

The competent lawyer for questions regarding crypto asset services and BaFin license under MiCAR in our law firm is Attorney Lutz Auffenberg, LL.M. (London).