MiCAR License Application for Crypto Asset Service Providers
With the Markets in Crypto Assets Regulation (MiCAR), the European Union created a uniform regulatory regime for the professional handling of crypto assets that applies to the entire European crypto market. Crypto asset service providers from both the EU and non-European third countries who wish to offer crypto asset services to EU citizens are required to obtain an authorization from the national competent authority for their European business once MiCAR comes into effect. In Germany, it is therefore required to obtain a BaFin license in accordance with the MiCAR regulation. The licensing requirement applies, among others, to crypto custodians and operators of crypto asset exchange platforms, providers of crypto trading services or of advisory services relating to investments in crypto assets, and asset managers who are also considering investments in crypto assets for their clients. Crypto asset services will thus be regulated uniformly throughout Europe once MiCAR comes into effect, which opens up great opportunities for the European single market in the area of crypto assets and breaks down barriers.
BaFin License for Investment Services as an Alternative to a MiCAR License
As long as MiCAR does not yet have legal effect, crypto asset service providers cannot apply for a BaFin license on its basis. In this respect, an attractive alternative according to German law may be to apply for an authorization as an investment firm according to the German Investment Firm Act (WpIG). This is because investment firms do not need an additional license under MiCAR for services relating to crypto assets if they already possess a BaFin license pursuant to the WpIG, which allows them to provide the relevant services relating to traditional financial instruments. In Germany, crypto asset service providers profit from the advantage that the WpIG already regulates crypto assets as financial instruments. Licensing procedures pursuant to the WpIG can therefore already be carried out in Germany for business models relating to crypto assets. A specialist lawyer or law firm in crypto regulation can provide helpful support to crypto asset service providers in such projects. For crypto asset service providers who intend to offer crypto trading services to their clients, for example, a BaFin license under the WpIG can therefore be a good possibility to achieve regulatory compliance for the operation of their business model and to be prepared as soon as MiCAR comes into effect.
Passporting of a BaFin License Possible under MiCAR and under WpIG
Both a BaFin license under MiCAR and under WpIG can be used by ways of EU passporting. A license granted by BaFin can therefore be used not only for business operations in Germany, but also for approaching clients in other member states of the European Union. To benefit from passporting, crypto asset service providers merely have to go through a comparatively simple notification procedure. To do so, they simply need to notify BaFin in which other EU country or countries they intend to provide the services they are licensed to provide. BaFin will then, in turn, inform the competent supervision authorities in the countries concerned. Subsequently, the crypto asset service provider can also address customers and take marketing measures in the target country without requiring additional authorization as a crypto asset service provider or as an investment firm by the supervision authority in the target country.
The competent lawyer for questions regarding MiCAR License in our law firm is Attorney Lutz Auffenberg, LL.M (London).