The MiCAR regulations on crypto services and crypto Asset service providers (CASP) will be applicable at the end of this year. The German legislator is already positioning itself and has published a government proposal for a Crypto Markets Supervision Act (KMAG), which will regulate how BaFin is to process license applications in accordance with MiCAR. For market participants, the transition to MiCAR means that they may have to approach the supervisory authority again in order to create the conditions for offering crypto services that are permitted under supervisory law once the MiCAR regulations come into force. However, not all crypto asset service providers will have to submit a basic initial application to BaFin. For companies that already hold a license under the current national crypto regulation or under applicable supervisory law, MiCAR provides for simplified procedures for obtaining the required BaFin license. But what types of procedures are available to the individual crypto asset service providers in this respect?
Complete Application for BaFin License According to MiCAR Required for Initial Registration
As expected, the most difficult type of procedure is applicable in the case of companies that are not yet regulated. Such CASPs will have to submit a complete license application to BaFin and may only become operational once BaFin has issued the requested license. The initial regulatory capital required under MiCAR, a proper business organization that covers all applicable requirements under MiCAR in relation to the crypto service to be provided and a viable business plan for the planned business model must be submitted. The directors of the CASP must be fit and proper and reliable. The shareholders and owners of the applicant company must also be reliable and provide appropriate evidence. According to the provisions of MiCAR, BaFin must confirm receipt of an application for authorization within 5 working days and then inform the applicant within 25 working days whether the application is complete. If this is not the case, BaFin must grant the applicant a rectification period at its own discretion. Should the application still be incomplete after expiry of the rectification period, BaFin may reject the application. In contrast, BaFin must decide on a complete application within 40 working days.
Banks and Investment Firms Benefit from Simplified Procedure for MiCAR License
For banks and investment firms that already hold a BaFin license for their business operations, the MiCAR provides considerable privileges. From the legal effect of MiCAR, credit institutions will also be allowed to provide crypto services if they notify BaFin of this at least 40 working days prior to offering crypto services for the first time. A separate MiCAR license is not required. In particular, the notification must contain a viable business plan with regard to the crypto services to be provided and also describe how the bank’s business organization will be structured in the future with regard to crypto services in a crypto-specific manner. After 20 working days, BaFin must state whether the notification is complete. As soon as the notification is complete, the credit institution may provide the planned crypto services. Investment firms can also benefit from this simplification, however, based on the notification procedure, they may only provide those crypto services for which they have a corresponding authorization as an investment firm. There is also a special feature for companies that are permitted to provide crypto services under national law on 30 December 2024 and apply for a MiCAR license from BaFin by 1 July 2025 at the latest. Such companies – such as crypto custodians with a license under the German Banking Act (KWG) – only have to prove to BaFin that they meet the additional obligations arising from MiCAR for their business model in order to obtain the MiCAR license. A complete application does not have to be submitted.
Attorney Lutz Auffenberg, LL.M. (London)
The competent lawyer for questions regarding a BaFin license under MiCAR in our law firm is Attorney Lutz Auffenberg, LL.M. (London).