What is a CASP license?
The Markets in Crypto Assets Act, or MiCA, establishes a specific legal environment in the EU for the cryptocurrency sector, bringing more clarity to the general rules for its participants. It aims to ensure transparency, unification, and security in the digital asset field and introduces uniform licensing rules across the EU.
Under MiCA, cryptocurrency companies that are currently categorized as VASPs (virtual asset service providers) will be re-categorized as CASPs (crypto asset service providers). “Crypto Asset services” include the following types of services and activities related to any crypto asset:
- providing custody and management services for crypto assets on behalf of clients;
- managing a trading platform for crypto assets;
- exchanging crypto-assets for fiat funds;
- exchanging crypto-assets for other crypto-assets;
- executing purchase orders for crypto assets;
- placement of crypto assets on the market;
- accepting and transmitting orders for crypto assets;
- provision of advice;
- managing a portfolio of crypto-assets;
- provision of crypto asset transfer services.
To operate legally in the EU, each company wishing to provide any of these services must obtain authorization under MiCA by obtaining a CASP license. Companies already holding a VASP license must reapply for a new license to the competent authority. The regulator responsible for accepting applications and monitoring depends on the jurisdiction. Meanwhile, a CASP license allows a company to provide its services in all EU countries.
MiCA is expected to come into force in late 2024/early 2025, after which CASPs will have 18 months to adapt to the new legislation and obtain a license. However, market participants can start applying for a CASP license from April 22, 2024.
Advantages of CASP license
Obtaining a CASP license offers several advantages to crypto asset service providers:
Legal operation in the EU
A CASP license allows a company to legally offer its services throughout the European Union.
Customer confidence
The license serves as a signal of trustworthiness to clients, demonstrating the company’s compliance with strict EU regulations.
Competitive advantage
Having a CASP license can give a company an advantage over unregulated competitors.
Market access
A CASP license provides access to a wider range of customers in the EU.
Passporting
A company with a CASP license can provide its services in all EU countries without needing additional permits.
Overall, the CASP license contributes to the credibility, transparency, and security of the crypto asset market in the EU.
Requirements for CASP license
Obtaining a CASP license requires compliance with several criteria established by MiCA regulations:
- The company must have minimum capital to ensure financial stability and cover potential risks.
- Effective risk management systems must be in place, including:
- operational risk;
- liquidity risk;
- credit risk;
- market risk.
- Business behavior requirements. The company must act honestly, transparently, and professionally toward clients. It must also have clear and understandable terms of service that inform clients of risks and fees.
- Requires the implementation of effective KYC/AML programs to identify customers and combat financial crime.
- Requires a local office where at least part of the business is conducted, with management conducted within the EU, where at least one of the directors is an EU resident, and the presence of qualified local top-level AML compliance officers (e.g., CCOs and MLROs). The exact requirements for each EU member state may vary.
- Technical requirements. The company must have a robust IT infrastructure with a high level of cybersecurity to protect client assets. Measures must also be in place to ensure backup and protection of customer data.
- Management requirements. Company managers and owners must have the necessary knowledge, experience, and qualifications to manage CASP operations.
Obtaining a CASP license requires careful planning, compliance with strict requirements, and professional training. We recommend contacting the lawyers at Fast Offshore Licenses for advice.
Capital Requirements for CASP License
Under MiCA, the share capital requirements of a company of its operation, and therefore the class of license.
CASP Class 1
Companies with a CASP Class 1 license may provide the following crypto asset services:
- accepting and transmitting orders on behalf of third parties;
- consulting on crypto assets;
- execution of orders on behalf of third parties;
- placement of crypto assets.
The required authorized capital for companies providing such services is €50,000.
CASP Class 2
Companies with this license may provide all crypto asset services under a Class 1 license, as well as:
- exchanging crypto assets for fiat money recognized as legal tender;
- exchanging crypto assets for other crypto assets;
- conducting trading of crypto-assets on a trading platform.
The required authorized capital for companies providing such services is €125,000.
CASP Class 3
This license allows the provision of any services under Class 2, as well as holding and managing crypto-assets on behalf of others.
The required share capital for companies providing such services is €150,000.
If you have a VASP license, we recommend that you increase your company’s share capital in the commercial register now to avoid administrative difficulties in the future.
Preparing to obtain a CASP license
Obtaining a CASP license is an important step for crypto asset service providers who want to operate legally in the EU market. Here are some key steps to prepare:
Study the MiCA Regulations.
Knowledge of MiCA is the foundation of the entire process. The Regulation defines CASP categories, licensing requirements, and market conduct rules.
Determine your CASP category.
MiCA establishes various CASP categories such as:
- cryptocurrency exchange platforms;
- custodial wallets;
- initial offering service providers (ICOs).
Each category has specific licensing requirements.
Assess compliance.
Audit your company to determine if you meet MiCA’s requirements for CASPs, which include:
- minimum capital, risk management systems;
- integrity, transparency, investor protection;
- anti-money laundering and terrorist financing;
- IT infrastructure security, and data protection.
Select EU jurisdiction.
Requirements for obtaining a CASP license may vary slightly from one EU jurisdiction to another.
Choose the EU member state where the licensing process best suits your company.
Prepare documentation.
The exact list of application documents varies by jurisdiction, but typically includes:
- business plan and company documents;
- a description of the company’s risk management system;
- information about the company’s management and key shareholders, including their experience and qualifications;
- a description of the technical infrastructure;
- an audit of the financial statements.
Contact the experts at Fast Offshore Licenses for advice.
Obtaining a CASP license can be a complicated process. Hiring lawyers specializing in cryptocurrency regulation in the EU will significantly save you time. Our experts will prepare for you a full list of documents required to obtain a license, analyze your business plan and anti-money laundering policy, and help you address any deficiencies identified in the analysis process. We will also assist you in preparing and submitting an application for a license in the EU jurisdiction of your choice.
Applying for CASP License
The application process for a CASP license may vary depending on the specific EU member state, but typically includes the following steps:
- Preparing a complete application package.
- Applying the competent authority.
The license application will likely be available on the website of the crypto asset regulator in your chosen jurisdiction. You can usually apply with the required documents online or at the regulator’s office.
- Paying the application fee.
Regulators usually charge a fee for processing the license application. The cost of the fee varies from country to country.
- Waiting for the regulator’s decision.
After submitting a complete application package, the regulator will analyze it. This process may take from 1 to 5 months. The regulator may request additional information or clarifications on your application.
- Obtaining a license (if approved).
If the regulator approves your application, they will issue you a CASP license.
The license will be valid for a certain period, usually several years, after which it will need to be renewed.
Conclusion
MiCA represents a significant moment in the cryptocurrency market, as it is the first comprehensive legislation for this still-evolving industry. It defines the assets that fall under its jurisdiction, establishes rules for product and service providers, and identifies the authorities responsible for regulation and compliance. Full implementation of MiCA is expected by late 2024/early 2025.
Under MiCA, crypto asset service providers are defined as organizations that provide crypto asset services on a professional basis and are permitted under EU law. From April 22, 2024, market participants can apply for a CASP license in the chosen EU jurisdiction. Obtaining a CASP license ensures the legality of a company’s activities in the field of cryptocurrency services, increases customer confidence, expands the market for activities in the EU, ensures legal custody and management of assets, obliges to comply with security standards, and gives a competitive advantage in the market.
FAQs about CASP licensing
Who issues CASP licenses?
CASP licenses are not issued by a single authority. Each EU member state is responsible for issuing licenses through its competent crypto asset regulatory authorities. These authorities oversee the licensing process and ensure compliance with the relevant regulations.
What is the disadvantage of CASP?
Overall, CASP licensing has its advantages, but it is not without its disadvantages:
- obtaining a CASP license can be a complex and time-consuming process that requires gathering extensive documentation, complying with various regulations, and potentially being subject to audits or inquiries from the regulator;
- regulatory uncertainty – the MiCA regulation requiring CASP licensing is relatively new, and while it sets out a framework, its interpretation and how it is applied in each EU member state can vary;
- potential limitations – depending on the CASP category you belong to, the license may limit the services you offer;
- does not guarantee success – a CASP license means compliance but does not guarantee success in the competitive cryptocurrency market.
How can one obtain a CASP license?
The CASP licensing process includes an application, eligibility assessment, additional information, and a decision on whether to issue a license. For more information, we recommend you consult our lawyers.