As adoption of crypto assets grows, so does the need for businesses to comply with new regulatory frameworks. The likelihood of needing a Crypto Asset Service Provider (CASP) license increases the more your company engages with third parties and adopts crypto technologies. 

 

Given the recent implementation of the Markets in Crypto-Assets (MiCA) regulation in the European Union, we at MMLaw have prepared this article to provide an overview for startups and mid-sized to large companies in determining whether and when to pursue a license for a crypto activity.

 

 1.  MiCA: Closing Regulatory Gaps in the EU

 

The MiCA regulation introduces a unified framework for Crypto Asset Service Providers (CASPs) across the EU. This is a significant development for startups and companies looking to expand in Europe. Previously, regulatory loopholes allowed some crypto activities to operate with little oversight, but those gaps have now closed. Compliance with MiCA is non-negotiable for businesses targeting the European market.

 

However, not every company needs to obtain this license right away. The need to secure a CASP license depends on your company's stage of development and its growth strategy. Early-stage startups may choose to delay the process, while companies with plans to scale in the EU will likely need to prioritize licensing.

 

 2.  Choosing the Right Jurisdiction

 

Selecting the right jurisdiction for licensing is a crucial decision and must be made on a case-by-case basis. While MiCA provides consistency across EU member states, each country still has specific requirements that can affect compliance obligations, as well as taxation, intellectual property rights, and labor laws.

 

Making an informed decision about where to apply involves considering not only crypto regulations but the entire business landscape of that jurisdiction. A clear understanding of local laws can help avoid delays or complications in the licensing process.

 

 3.  The Importance of a Multidisciplinary Effort

 

Legal expertise alone is not enough to obtain a CASP license. Startups and established companies must align their financial models and operational structures with MiCA’s regulatory standards. This process often requires coordination with financial consultants and compliance experts. Areas such as anti-money laundering (AML) and counter-terrorism financing (CTF) require specific attention to meet the expected compliance levels.

 

A multidisciplinary approach ensures that all technical and operational aspects are handled correctly, minimizing the risk of delays or potential license rejections.

 

 4.  Navigating Red Tape and Avoiding Delays

 

Although MiCA aims to harmonize regulations across the EU, red tape still exists at the national level. Different jurisdictions may interpret MiCA regulations differently, which could create challenges during the application process. Without proper guidance, businesses may face significant delays or even denial of their applications due to local regulatory nuances.

 

Addressing these requirements early in the process can save considerable time and resources, ensuring that your license application proceeds smoothly.

 

 5.  Comparing CASP Licensing: EU vs. Global Crypto Hubs and Tax Havens

 

When considering a CASP license, businesses must also evaluate other jurisdictions like the UAE, Singapore, Hong Kong, South Korea, and tax havens such as the Cayman Islands, Panama or BVI. 

 

The choice of jurisdiction impacts not only regulatory constraints but also factors such as the core business (gaming, betting and proprietary trading can be critical), costs, tax burden, access to consumer markets, and ease of dealing with financial institutions.

 

In the EU, MiCA provides a unified market but involves higher costs and a more complex process, while in jurisdictions like the UAE, particularly Dubai, offers a faster licensing process under VARA, an important crypto hub, though market reach is more limited.

Singapore has a highly regarded regulatory framework, but the high cost of compliance can be restrictive for smaller companies.

 

Hong Kong shows potential as a crypto hub, but political risks and restrictions related to China present challenges.

 

Tax havens offer low taxes and more flexible regulations and tokens in these jurisdictions are less likely to be classified as securities, but businesses might struggle with financial institutions and limited market access.

 

 6.  Conclusion: A Case-by-Case Approach

 

Ultimately, whether your business needs a license to engage on a crypto activity depends on multiple factors: the type of crypto assets you handle, the cost of compliance, and your growth objectives and the more your business interacts with third parties and engages with consumers in the EU, the greater the likelihood of needing a CASP license. 

 

By carefully evaluating these factors and choosing the right jurisdiction, businesses can avoid regulatory setbacks, fines, and market limitations, ensuring smoother operations in a chosen market.