The European Markets in Crypto Assets Regulation (MiCAR) will gradually replace the national regulation of crypto services this year. On December 30, 2024, the rules of the EU regulation will apply to all CASPs in Europe. Thanks to various transitional arrangements, not all of them will require a MiCAR license immediately. However, it already makes sense to plan the transition to the new regulatory regime now. Compared to traditional regulation in the financial services sector, one crypto service that differs significantly under MiCAR is advice on crypto assets. This is because under the current regulation in Germany, investment advice only covers advisory services on transactions relating to financial instruments, including crypto assets. However, advice on crypto assets under MiCAR will go significantly further and, in addition to advice on transactions relating to crypto assets, will also regulate advice on the use of crypto services. This means that from 30 December 2024, anyone who provides customers with personalized recommendations on the use of certain crypto services may themselves be subject to a licensing requirement under MiCAR as a crypto advisor and may have to obtain a BaFin license for this activity beforehand.

When Does the Obligation to Obtain Permission for Provider Recommendations Apply?

In particular, crypto service providers that advertise the crypto services of third-party providers as part of their own service provision may constitute crypto advice in individual cases. This would be conceivable, for example, in cases where a crypto trading platform presents the services of various crypto custodians to its customers or a provider of crypto exchange services presents the use of the services of various portfolio managers for crypto assets. However, in order to trigger the licensing requirement in relation to crypto advice, it is always necessary for personalized recommendations to be made to the customer. It will therefore not be sufficient to simply name several different providers of a crypto service. MiCAR authorization may only be required if an advisory element is added. Therefore, if statements are made that suggest to the customer that a certain crypto service provider is particularly suitable for this customer compared to others, the crypto advice may be in the form of a provider recommendation. However, whether the recommendation to the customer is actually tailored to them, for example by taking their specific portfolio, their investment preferences and their personal risk profile as a basis, should not play a role. Rather, the decisive factor should be how the recommendation is presented from the customer’s perspective. Referrers should therefore exercise caution with statements that are intended to make customers believe that the use of a particular crypto service is a perfect fit for them or meets their specific needs.

What Should Referrers of Crypto Service Providers Consider in the Future?

Referrers should always take the MiCAR licensing requirement for crypto advice in the provider recommendation variant seriously and design all of their customer communications with this in mind. In all advertising statements relating to the offer of third-party crypto service providers, referrers should ensure that under no circumstances can the impression be given to the customer that the recommendation of the third-party provider was made taking into account the customer’s personal circumstances. The more general the advertising statement, the lower the risk of inadvertently providing crypto advice that requires a license. For influencers who make recommendations via public channels, on the other hand, the risk of providing crypto advice regulated under MiCAR is low, as they cannot make personalized recommendations because their audience is usually unknown to them.

Attorney Lutz Auffenberg, LL.M. (London)

I.  https://fin-law.de

E. info@fin-law.de

The competent lawyer for the application of a BaFin license according to MiCAR and structuring of a business model to avoid licensing obligations in our law firm is Attorney Lutz Auffenberg, LL.M. (London).