These proposed regulations specify the simplified authorization procedure and create the possibility of submitting applications before the MiCAR regulations become fully applicable.
In brief: Simplified authorization procedure for already regulated institutions
At the end of 2023, the German legislator presented the draft Financial Market Digitization Act (“FinmadiG“), which, among other things, provides for a separate Crypto Markets Supervision Act (“KMAG“) (we reported here). The KMAG enables a so-called simplified procedure through which institutions that already have a national license for crypto asset services can obtain a MiCAR license under simplified conditions.
Key points of the draft bill
The draft bill comprises two regulations:
- The MiCAR-TransitV, which specifies the simplified procedure for already regulated institutions, and
- the MiCAR-AntragsV, which allows applications to be submitted before the MiCAR becomes fully applicable.
Implementation of the simplified procedure through the MiCAR-TransitV
The MiCAR-TransitV is intended to structure the simplified procedure for companies already holding a license. This applies in particular to owners of a German license for the crypto custody business who do not also hold other (EU) licenses that would allow them to make use of the notification procedure. This is intended to enable already regulated institutions to make a simple transition to the MiCAR legal framework.
The BaFin review to be carried out in the simplified procedure in accordance with MiCAR-TransitV should be limited to those aspects in which the MiCAR requirements go beyond the existing requirements under current supervisory law and take into account the special features of the market and business models.
For example, applicants must present their current business organization and corporate governance to BaFin and submit an updated business plan. Depending on the specific crypto-asset service to be provided, additional obligations to provide proof may apply.
Application before MiCAR comes into force through the MiCAR-AntragsV
Parallel to the MiCAR-TransitV, the MiCAR-AntragsV regulates the details of the application for authorization as a crypto asset service provider (also “CASPs“) under MiCAR. This regulation is particularly relevant as it enables applications to be submitted before MiCAR comes into full force on December 30, 2024.
This is the BMF ‘s response to the business community’s need to make the transition as smooth and efficient as possible. Both already regulated companies and new market entrants should be able to enter into dialog with the supervisory authority at an early stage in this way. The MiCAR-AntragsV will expire once its purpose has been fulfilled, probably at the end of 2024.
Practical implications for CASPs
The new legal framework in Germany, which is to be introduced by the MiCAR-TransitV and the MiCAR-AntragsV, represents a significant step in the right direction for existing and prospective crypto asset service providers:
- Regulated institutions should now consider the substantive requirements that will be placed on their application as part of the simplified authorization procedure and start preparing their application.
- Furthermore, regulated institutions as well as new market entrants can prepare for the possibility of submitting an application as early as this year. With regard to the exchange with BaFin required as part of the application procedure, this option should be made use of in order to be able to offer crypto asset services in the EU single market at the same time as MiCAR becomes fully applicable.
Market participants and experts had until April 19, 2024 to comment on the proposed regulations. It is expected that the regulations will be adopted and enter into force by summer 2024 at the latest.
