Application of EU Regulation on Markets in Crypto Assets begins, but companies already operating in the European market are subject to various transitional periods – customers should beware
The MiCA Regulation1 becomes fully applicable as of 30 December 2024. The Regulation requires crypto-asset service providers to comply, for the first time, with several requirements that are well-established in the financial markets. These requirements are concerned with, among other things, corporate governance, management competence, own funds, data transparency, information security and management of conflicts of interests.
Transitional period in Finland
At present, there is not a single authorised crypto-asset service provider in Finland. Current registered virtual currency providers have been under the obligation to apply for an authorisation from the FIN-FSA by the end of October to be able to keep providing their services under current national law, i.e. the Act on Virtual Currency Providers, at the maximum until 30 June 2025 (transitional period). The FIN-FSA received seven applications for authorisation by the deadline from companies registered under the current Act. The right of the applicants to provide services related to virtual currencies will end unless they are granted an authorisation at the latest by the end of the transitional period. They must discontinue their operation even sooner if the FIN-FSA makes a negative decision concerning the application for authorisation.
Other member states
Application of the MiCA Regulation involves a transitional period, which may be of a different length in different European Union and European Economic Area (EEA) member states. Finland applies a six-month transitional period, which is among the shortest in the EU and the EEA. In most of the member states, the transitional period is 12 or 18 months. In the latter case, application of the requirements of the MiCA Regulation to crypto-asset services will not begin until June 2026.
When acquiring crypto-assets or crypto-asset services from outside Finland, if one wants to be sure of their rights, they should consider that the transitional period may differ from Finland. The requirements applicable to a service provider during the transitional period may be very tolerant. In some EU and EEA countries, the only requirement has been to notify the supervisor of the operation, without the supervisor reviewing the prerequisites for the operation. Although the prerequisites for operation have been reviewed in Finland before granting the registration of a virtual currency provider, it must be understood that the requirements were considerably and substantially more limited than those applying to, for example, credit institutions or investment firms, or what is required to obtain authorisation as a crypto-asset service provider. Therefore, current registered virtual currency providers will not be automatically granted the authorisation of a crypto-asset service provider. Finnish virtual currency providers and their customers should be prepared for the event that the service provider may have to discontinue its operation.
Regulation changes – customers’ risks do not
Anyone acquiring crypto-assets or crypto-asset services must therefore be cautious; in particular because different transitional periods continue to apply for approximately the next year and a half. Also after the end of the transitional period and in the prevailing the market frenzy triggered by the US presidential elections, one should bear in mind that risks associated with crypto-assets have not changed, and an increase in regulation will not reduce them. Crypto-assets continue to involve, for example, extreme price fluctuations, aggressive and return-focused marketing, special information security risks and an accentuated risk of getting scammed. Furthermore, the MiCA Regulation does not require all crypto-asset service providers to assess the suitability of a service or product provided by it to its customers. The customers of crypto-asset service providers are not protected in the event of a default of the service provider, and the operation is not covered by any investor protection fund.
For further information, please contact
Tytti Tanninen, Senior Supervisor, telephone +358 9 183 5533 or tytti.tanninen(at)finanssivalvonta.fi
Appendices
- The European Securities and Markets Authority has published a warning on the subject on 14 December 2024.
- Statement of the European Securities and Markets Authority to supervised entities on the subject.
- List of transitional periods in different EU and EEA countries on the website of the European Securities and Markets Authority.
1 Regulation (EU) No 2023/1114 of the European Parliament and of the Council on markets in crypto-assets, and amending Regulations (EU) No 1093/2010 and (EU) No 1095/2010 and Directives 2013/36/EU and (EU) 2019/1937.