A new licensing regime for crypto payments

MiCA introduces a new, standardised licensing regime for crypto services, which ensures providers are held to similar standards as Europe’s Electronic Money Institutions (EMIs) and other regulated financial institutions. 

Under MiCA, all crypto asset service providers and issuers operating in Europe must be licensed and overseen by an EU regulator. To get their licence, providers must meet specific requirements:

• Stablecoin issuers such as Circle for example, must meet governance requirements designed to increase transparency and reduce risk to users, such as holding the majority of their reserves in low risk, liquid assets, such as cash (bank deposits). These requirements came into effect on 30 June 2024.
  
  
• Crypto payment providers must be authorised as crypto asset service providers (CASPs) under MiCA. This is a broad category, including payment companies like BVNK who enable businesses to send and receive stablecoins, as well as crypto trading platforms who enable consumers to trade crypto. Providers have different obligations depending on their business activities.

Rules for CASPs come into effect on 30 December 2024. For providers who already provide crypto asset services in the EU, like BVNK, there will be a transitional period under MiCA which extends into 2025. BVNK has operated as a virtual asset service provider (VASP) in Europe since 2022, overseen by the Bank of Spain. We’re on track to submit our CASP application and will continue to operate under MiCA.

From VASP to CASP – what’s the difference?

Before MiCA, most of Europe’s crypto fintechs were registered as virtual asset service providers (VASPs). Rules for VASPs differed between EU member states, but most focused on preventing financial crime and money laundering. MiCA applies to all providers operating in Europe and is broader in scope. It includes comprehensive financial crime measures, as well as provisions to ensure operational resilience and robust risk management. 

Upgrading from a VASP to a CASP could be a challenge for providers who have previously been subject to more lenient regimes. To meet the CASP standards under MiCA, providers may need to invest more deeply in technology, training and compliance. 

As a regulated financial services business, both in the UK and the EU, BVNK is very familiar with financial services requirements and we’re ready to make this transition. MiCA has taken long-standing regulatory principles from traditional financial services such as the need to hold capital reserves and safekeeping of customer funds, and adapted them for digital assets. At BVNK, we’ve been providing fiat and digital asset services across Europe for a number of years and we’ve built strong compliance frameworks and controls to go with it. We’ve taken many of our learnings and frameworks and adapted them for MiCA.
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How does MiCA compare to other crypto regulation?

MiCA sets a comprehensive and uniform standard that may influence other regional approaches going forward – as regulators worldwide aim to provide similar levels of protection, while encouraging innovation. Here’s how MiCA compares to digital asset regulation in other parts of the world today.

US‍

The regulatory environment in the United States is intricate, with different agencies responsible for supervising different types of crypto assets. The United States currently lacks a comprehensive crypto or stablecoin framework, but there are several proposed bills which seek to change that. The most recent is Senator Hagerty’s stablecoins bill, which could overcome the stalemate in congress by balancing federal and state oversight. For example, Hagerty’s bill gives smaller providers more flexibility to seek state oversight; while systemically important providers are required to have stricter federal oversight. 

Singapore

The Monetary Authority of Singapore (MAS) governs digital assets through the Payment Services Act (PSA) and related measures. Like Europe under MiCA, providers must be licensed and must meet requirements around AML/CTF and consumer protection. However Singapore’s approach used a tiered licensing structure, which contrasts with MiCA’s unified approach.

Hong Kong ‍

Hong Kong has taken a proactive stance on safely integrating crypto into its financial services industry. Hong Kong’s Securities and Futures Commission (SFC) requires VASPs to obtain a licence if their activities involve virtual assets that are securities or futures. From June 2023, the regime was expanded to cover exchanges and custodians offering non-securities-based crypto assets. Like Europe, VASPs in Hong Kong must implement robust AML and CFT measures and segregate customer funds. Hong Kong’s regime applies only to providers operating in Hong Kong.

United Arab Emirates (UAE)‍

VASPs in the UAE must be licensed by relevant authorities, with rules emphasising AML/CFT compliance and consumer protection, including clear risk disclosures and asset segregation. Like MiCA, licensing requires a strong governance framework and adequate risk management. Unlike MiCA which is standardised across Europe. The UAE’s framework is regionally fragmented, with distinct rules in mainland UAE and financial free zones.

A regulated future for stablecoin payments

As regulatory regimes for stablecoins develop around the world, BVNK will continue to advocate for frameworks that protect customers and empower innovators. 

We believe the future of payments is multi-rail and we envisage a world where stablecoins and fiat currencies can be interchanged seamlessly in real time.  Underpinned by our global licensing across fiat and digital assets, BVNK aims to be at the centre of that shift, connecting banks and blockchains to create a payment network that accelerates the movement of money across borders.