Redefining Cryptocurrency Regulation: How MiCA Impacts Your Company

Source: cryptoslate

##Note: The following is a guest post by Mark Gofaizen, Senior Partner at Gofaizen & Sherle.

As MiCA regulations approach that will reshape the cryptocurrency industry, cryptocurrency companies need to ensure compliance for a smooth transition.

Market Regulation in Crypto-Assets (MiCA) is an important step taken by the EU in regulating the crypto-asset market and one of the hot topics in 2024. MiCA aims to inject transparency and security into the market, addressing the needs of cryptoasset service providers (CASPs) and issuers, while protecting investors.

For companies operating in the cryptocurrency space, MiCA makes a clear call to change their processes to adapt to the new regulatory environment. MiCA covers topics from operational flexibility to consumer protection, ensuring the sustainable development of crypto asset markets and compliance with wider financial market regulations.

Industry stakeholders and companies need support and guidance during this transitional period. This article will describe how MiCA affects companies, focusing on processes that need attention, potential cost increases and staffing requirements.

1 .MiCA’s core requirements

With The cryptocurrency industry is on the verge of a regulatory evolution following the draft Regulatory Technical Standards (RTS) outlined by the European Securities and Markets Authority (ESMA). These upcoming standards, expected to be submitted to the European Commission on June 30, 2024, are critical for CASPs aiming to obtain a MiCA license.

Fundamental aspects of MiCA include:

• Anti-Money Laundering (AML):CASP must comply with a comprehensive set of laws and procedures to prevent illegal funds from masquerading as legitimate funds.

• Countering the Financing of Terrorism (CFT): Cryptoasset service providers have a responsibility to take steps to prevent the flow of funds Terrorist organization.

• Authorized Capital: CASP must determine the maximum capital it can issue in accordance with its charter.

• Customer Due Diligence (CDD): Cryptoasset service providers must verify customer identities and assess transaction risks.

• Suspicious Transaction Report (STR): CASP must have procedures in place to detect and report suspicious transactions to the competent authorities .

• Cooperation and Information Sharing: Cooperation and sharing of necessary information with competent authorities is another aspect of CASP obligation.

These basic requirements align CASP with broader fiscal and regulatory expectations and tailor it to its unique operating framework.

2 .Aligned with broader financial regulations

The launch of ##MiCA requires a comprehensive overhaul of CASP operations, highlighting the need for an overall strategy to foster a transparent, secure, consumer-focused cryptocurrency market that is in sync with broader financial regulation.

Key business process areas requiring review include:

Talent development and recruitment

To comply with MiCA, companies need to create a team dedicated to financial services or crypto-asset regulatory compliance. Recruiting risk management experts and legal counsel is critical to navigating the complexities of MiCA. These professionals will help identify, assess and mitigate risks and ensure that all company operations are fully compliant with the new regulations.

A CASP should have at least one senior executive (director) in the country of its establishment and organize its activities through a place of business in the EU.

Collection and Use of Personal Data#MiCA requires the protection of consumer information and Segregate customer assets. Companies must ensure compliance with privacy and data protection by developing secure systems for collecting and using personal data. Additionally, the regulation requires the implementation of a customer separation system to protect customer assets, a measure aimed at improving consumer protection in the crypto market.

Reporting and Accounting

Companies must improve their reporting and accounting practices to meet MiCA’s transparency and accountability standard. These standards include accurately reporting financial transactions and maintaining corporate records in compliance with regulatory requirements.

Crypto-asset User Advisory Services

MiCA places great emphasis on the quality of advisory services provided to crypto-asset users. Firms providing advisory services must consider clients' personal circumstances, investment objectives and risk appetite to ensure advice is personalized, transparent, fair and not misleading.

Cryptocurrency trading services and related policies

For companies that provide cryptocurrency trading services, MiCA strives to Ensure transactions are fair and orderly, establish rules for order execution, and provide clear information about crypto asset trading. The regulation aims to improve the integrity and stability of cryptocurrency trading services by providing consumers with a safer trading environment.

3 .MiCA: Opportunities, not challenges

## The launch of #MiCA is a milestone for the EU crypto-asset market and sets a precedent for global regulatory frameworks. As we enter a new era of compliance and regulation, companies in the cryptocurrency industry will be given a transition period until June 2025. The regulatory changes are expected to create a more secure and secure crypto environment as the proposed changes are submitted to the agency for coordination and feedback by March 28.

As companies seek to comply with regulations, it is extremely important to focus on strategic planning, invest in compliance infrastructure, and develop knowledgeable compliance teams. Embracing MiCA not just as a compliance challenge but as an opportunity to improve operational integrity and consumer trust can help companies succeed in an increasingly regulated global cryptocurrency market.

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