The Markets in Crypto-Assets Regulation is the European Union's comprehensive framework for crypto-asset issuance and service provision. It replaced a patchwork of national regimes with a single regulatory perimeter, and it establishes passporting: authorisation obtained in one member state permits service provision across all twenty-seven.
For firms operating in both the UK and the EU, MiCA and the UK cryptoasset regime are separate frameworks with different definitions, different requirements and different timetables. The conclusion reached under one does not carry across to the other.
This article sets out the MiCA framework, the requirements applying to crypto-asset service providers and token issuers, and the points at which the UK and EU regimes diverge.
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Scope and structure
MiCA covers three categories of crypto-asset.
Asset-referenced tokens (ARTs). Tokens referencing a basket of assets, currencies or commodities, seeking to maintain stable value by reference to that basket.
Electronic money tokens (EMTs). Tokens referencing a single official currency, functioning as a means of exchange.
Other crypto-assets not classified as financial instruments under MiFID II and not falling within the ART or EMT definitions.
Crypto-assets already classified as financial instruments under MiFID II remain within that framework. Central bank digital currencies fall outside MiCA, as do fully decentralised arrangements with no identifiable issuer or service provider.
Crypto-Asset Service Providers
A CASP is a legal person or undertaking whose occupation or business is the provision of one or more crypto-asset services to clients on a professional basis.
Regulated services include custody and administration of crypto-assets on behalf of clients; operation of a trading platform; exchange of crypto-assets for funds or for other crypto-assets; execution of orders; placing of crypto-assets; reception and transmission of orders; advice on crypto-assets; and portfolio management.
Authorisation is granted by the national competent authority of the member state in which the CASP has its registered office. Once authorised, the CASP may provide services across the EU under the passporting regime.
The NCA has a defined period to assess a complete application, extendable for complex cases. Firms should expect the assessment to focus on governance, financial resources, systems and controls, custody arrangements, and the fitness and propriety of management and shareholders.
Safeguarding client crypto-assets
Safeguarding is among the most operationally significant obligations MiCA imposes.
CASPs providing custody or otherwise holding client crypto-assets must segregate client holdings from the CASP's own proprietary assets, maintain organisational arrangements minimising the risk of loss or diminution, ensure client crypto-assets can be identified and returned promptly, and refrain from using client crypto-assets for their own account or for the account of any other person without explicit prior consent.
The practical requirement is a records and reconciliation framework capable of demonstrating, at any point, that client holdings are complete and correctly attributed. That means reconciliation between internal client records, the CASP's own ledger, and on-chain or custodian-held balances.
MiCA does not prescribe a reconciliation frequency in the Level 1 text. ESMA technical standards and supervisory expectation establish continuous or near-continuous verification as the practical standard for custody providers.
CASPs are also required to hold professional indemnity insurance or a comparable guarantee against liabilities arising from professional negligence.
Stablecoin issuance: ARTs and EMTs
Issuers of asset-referenced tokens and electronic money tokens face additional requirements.
Reserve requirements. EMT issuers must maintain reserves equal to the outstanding token value, invested in secure, low-risk assets. ART issuers face reserve requirements with additional rules on composition and concentration.
Redemption. Holders have redemption rights, with the terms and conditions specified.
White paper. Issuers must publish a crypto-asset white paper containing prescribed disclosures, with liability attaching to its content, and must notify the NCA.
Governance. Organisational requirements covering board composition, compliance function, risk management, conflicts of interest and outsourcing.
Significant tokens. Where an ART or EMT meets significance criteria, supervision transfers to the European Banking Authority, with enhanced requirements and supervisory college arrangements.
Reporting and ongoing obligations
CASPs report to their NCA on client asset positions, complaints, significant incidents, and material changes to governance. Stablecoin issuers face additional reporting on reserve composition, redemption activity and market capitalisation.
MiCA's emphasis on continuous compliance means that firms should be able to generate compliance evidence on demand rather than at reporting intervals. Firms accustomed to annual or quarterly national reporting regimes commonly underestimate this shift.
Additional obligations include a market abuse regime for crypto-assets, complaints handling requirements, and the transfer of funds regulation travel rule for crypto-asset transfers. Financial crime obligations apply under the EU anti-money laundering framework; our guide to FCA financial crime compliance addresses the equivalent UK framework.
MiCA and the UK regime compared
Firms operating in both jurisdictions should not assume equivalence.
| MiCA | UK cryptoasset regime | |
|---|---|---|
| Legal basis | EU Regulation, directly applicable | FSMA 2000 as extended, with FCA rules |
| In force | Titles III and IV from 30 June 2024; remainder from 30 December 2024 | Regime applies from 25 October 2027 |
| Authorisation | NCA of the member state of registered office, with EU passporting | FCA authorisation; no equivalent passport |
| Token categories | ARTs, EMTs, other crypto-assets | Qualifying stablecoins and other qualifying cryptoassets |
| Stablecoin supervision | NCA, with EBA for significant tokens | FCA, with the Bank of England for systemic sterling stablecoins |
The regulated activity definitions differ, the token classifications differ, and the prudential calibrations differ. A firm authorised as a CASP under MiCA requires separate UK authorisation for UK activity, and the analysis of which activities fall within scope must be conducted separately under each regime. See our guide to the UK cryptoasset regime.
Firms issuing tokens that may fall within the electronic money definition in either jurisdiction should also consider the e-money framework, where the boundary is not always obvious.
About Regulatory Counsel
Regulatory Counsel advises UK and international financial services firms on authorisation, prudential and conduct requirements, governance, financial crime and regulator engagement.
Our MiCA work covers regulatory scope and token classification analysis, CASP authorisation applications and NCA engagement, selection of member state of authorisation and passporting strategy, client crypto-asset safeguarding frameworks, ART and EMT issuance requirements including reserves and white papers, governance and organisational requirements, reporting frameworks, and parallel analysis across the UK and EU regimes for firms operating in both.
Contact our regulatory team at info@regulatorycounsel.co.uk.
This article is provided for general information and does not constitute legal or regulatory advice. Firms should confirm the current position against ESMA, EBA and national competent authority publications and take advice on their specific circumstances.
Frequently Asked Questions
The Markets in Crypto-Assets Regulation, the European Union's framework for the issuance of crypto-assets and the provision of crypto-asset services. It establishes uniform rules across all EU member states with passporting rights following authorisation in one.
Crypto-asset service providers offering custody, trading platform operation, exchange, order execution, placing, order reception and transmission, advice or portfolio management; and issuers of asset-referenced tokens and electronic money tokens. Fully decentralised arrangements with no identifiable issuer or service provider fall outside scope, as do central bank digital currencies and crypto-assets classified as financial instruments under MiFID II.
CASPs holding client crypto-assets must segregate them from their own holdings, maintain arrangements minimising the risk of loss, ensure client assets can be identified and returned promptly, and refrain from using client assets for their own account without explicit prior consent.
MiCA does not prescribe a frequency in the Level 1 text. ESMA technical standards and supervisory expectation establish continuous or near-continuous verification as the practical standard for custody providers.
Yes. Authorisation by the NCA of the member state of registered office confers passporting rights across all EU member states.
Yes, where it carries on regulated cryptoasset activity in the UK. MiCA and the UK regime are separate frameworks and neither confers authorisation under the other.
Supervision of significant asset-referenced tokens and electronic money tokens transfers to the European Banking Authority, with enhanced requirements and supervisory college arrangements.