From 30 December 2024, the provisions of the Markets in Crypto Assets Regulation (MiCAR) will be legally effective throughout the European Union. From that date, crypto-asset service providers within the scope of the new regulation will no longer be allowed to provide their services without the required MiCAR authorization. MiCAR does not recognize the tied agent model, a concept known from other areas of financial market regulation, in which activities requiring a license can be provided under the responsibility of a sufficiently authorized institution without a license of one’s own. In this regard, ESMA already clarified in September 2024 that crypto-asset services under the MiCAR may only be provided by companies that are either authorized as crypto-asset service providers or that have successfully completed a notification procedure in accordance with the MiCAR as a credit institution or securities institution that is already supervised. Since, under the current regulation in Germany according to the Investment Firm Act (WpIG), crypto securities are considered financial instruments and the law allows liability umbrella solutions for business models in which companies in Germany exclusively provide investment brokerage, investment advice or placement services, the transition to the MiCAR regime for correspondingly tied agents potentially represents a real showstopper. What can tied agents and their liability umbrellas with crypto-related business models do before 30 December 2024 to seamlessly continue business under MiCAR?
Can Tied Agents be Covered by the MiCAR Transitional Provision?
MiCAR provides for a transitional regime for providers of crypto-asset services that have provided their services in accordance with the law applicable to them, i.e. in accordance with the applicable national provisions. Such providers may continue to provide their services after 30 December until 1 July 2026, or until a MiCAR license is granted or refused, whichever event occurs first. However, member states have the option of shortening the timeframe until 1 July 2026. The German legislator has not yet enacted any implementing legislation for MiCAR, so a shortening of the timeframe is not to be counted in for the time being. According to the wording, tied agents would in principle be able to make use of the transitional regulation, since they have legally provided crypto value services prior to 30 December 2024 under the applicable national regulations. However, it must be taken into account in any case that the permissibility under supervisory law of the provision of services by tied agents is derived from the investment firms acting as a liability umbrella. In view of this, it can be assumed that reliance on the transitional regulation for tied agents can only be considered if the liability umbrella solution used continues to exist under the applicable law from 30 December 2024 and the liability umbrella continues to fulfill the relevant requirements. In contrast, BaFin has contacted the institutions under its supervision that have tied agents and pointed out that the involvement of tied agents will be inadmissible under MiCAR. Tied agents who therefore wish to invoke the transitional provisions of MiCAR should in any case clarify this approach in advance with their liable institution and BaFin.
The Alternative to the Liability Umbrella is Either an Outsourcing Solution or a MiCAR Authorization
If tied agents are not eligible or unwilling to rely on the MiCAR transitional provisions, they need an alternative solution. It is possible to apply to the competent authority for an own MiCAR license, but such an application requires thorough and time-consuming preparation, as well as patience until the BaFin approval process is complete. A so-called outsourcing solution can be implemented more quickly, in which the previous tied agent acts as an outsourcing company for the provider authorized to provide crypto-asset services. As in the liability umbrella model, the provider of crypto-asset services is then responsible under supervisory law. The outsourcing company then provides technical services to the provider, such as the provision of a technical platform, support services and distribution. However, caution is advised with regard to outsourcing solutions in which outsourcing to crypto companies from non-EU countries is to take place. In ESMA’s view, outsourcing must not lead to a situation in which the third-country company ultimately provides crypto-asset services in Europe without an own authorization through a European special-purpose entity, while the service itself is actually provided in a third country.
Attorney Lutz Auffenberg, LL.M. (London)
The lawyer responsible for questions relating to liability umbrellas or outsourcing solutions or to applications for an authorization according to MiCAR at our law firm is Attorney Lutz Auffenberg, LL.M. (London).
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