From December 30, 2024, crypto service providers in Europe will only be allowed to provide crypto services with a MiCAR license. The companies affected must already prepare now for the new rules to apply and ensure that they will be able to offer their crypto services in the future on the basis of the authorizations that will then be required and in compliance with all applicable compliance obligations. However, MiCAR will also bring advantages for European crypto service providers. In particular, the European crypto market will no longer be a regulatory patchwork under MiCAR. The standardized supervision of crypto service providers in Europe means that passporting will also be possible. Under MiCAR, crypto service providers will therefore be able to use a MiCAR license granted to them in one member state to provide services in other EU member states without having to obtain further authorization there, provided they have gone through a comparatively simple notification procedure with the supervisory authority of the target country. But what is the new regulatory situation under MiCAR for crypto service providers from third countries? Will they be able to serve European customers without MiCAR authorization as long as they do not actively solicit such customers?

Passive Freedom to Provide Services is to be Severely Restricted under MiCAR

Although MiCAR expressly allows companies from third countries without a MiCAR license to provide crypto services in cases where the service is used exclusively at the instigation of the client without any action on the part of the company, this exception is to be interpreted very restrictively. However, in its consultation paper published in January 2024, ESMA, which was tasked with specifying the provision, made it clear that this exemption should be interpreted very restrictively. ESMA emphasizes that the so-called reverse solicitation, which is an exception to the principle of the permission requirement, is actually a ban on actively approaching clients, which should only allow unlicensed companies from third countries to serve clients from Europe in individual cases within very narrow limits if the business initiation takes place on the client’s initiative. ESMA further states that, when interpreting the provision on the passive freedom to provide services, the national competent supervisory authorities should take into account that crypto service providers from third countries will attempt to systematically offer crypto services in Europe on the basis of the exception for reverse solicitation. In EMSA’s opinion, this possibility should not be granted by the interpretation of the provision.

According to EMSA, Authorized Reverse Solicitation Should Not Be a Free Pass for Unlicensed Crypto Services

ESMA therefore further restricts the possibility of reverse solicitation under MiCAR in its consultation paper by clarifying that crypto service providers from third countries may only provide their services on the basis of the exception in a very short time window. In particular, in the case of an authorized service provision, they will not be permitted to offer further crypto services to the customer acquired due to the fulfillment of all requirements of the passive freedom to provide services. This restriction is expressly provided for in the MiCAR exception to reverse solicitation itself. The opportunities for companies from third countries to serve European customers are thus limited to a minimum under MiCAR. For crypto service providers from non-EU countries, this means that they should either acquire a MiCAR license via a branch in Europe or create internal processes for handling customers from Europe. The only alternative would be to generally refuse to accept European customers without exception in order to avoid the risk of providing unauthorized crypto services.

Attorney Lutz Auffenberg, LL.M. (London)



 The competent lawyer for advice on MiCAR exceptions for the passive freedom to provide services for crypto service providers from third countries in our law firm is Attorney Lutz Auffenberg, LL.M. (London).