ESMA letter to the Council of the European Union on MiCAR Authorisation Infrastructure 17 October 2023

The announcement in the media that Coinbase is selecting Ireland as its EU regulatory headquarters has sparked quite a lot of discussion in ​crypto regulatory circles.

Myself and a few others have been thinking about similarities between the race for a MiCAR authorisation [either from a standing start or from the position of already being a Virtual Asset Services Provider registrant in the EU] and the race for UK regulated firms needing an EU home post Brexit. In particular, I recall certain member states doing road shows on why a UK regulated firm should choose its country. While in Ireland, when challenged by the representative bodies and gatekeepers about doing more, the Central Bank of Ireland responded in speeches that it was in no one's interest to get involved in a race to the bottom.

Will we not see something similar when it comes to MiCAR?

Just because company A has a VASP registration in EU country A, it could make sense but, it doesn't necessarily follow that it will pursue a MiCAR authorisation in EU country A. That is more so the case, arguably, when they have VASP registrations in EU countries B, C and others (because there is no passporting).

Therefore, and I am already seeing it myself, there are EU countries laying out their stall for your MiCAR authorisation regardless if you are (or not) already registered there as VASP. Some EU countries argue that their current VASP registration (& remember it was only ever intended to be a mere registration) is so robust and already aligned to MiCAR that you will find its offering a fast, efficient & effective way to getting the authorisation crown. I suspect other member states might take a political or supervisor risk-based decision not to exceed their obligations when dealing with a MiCAR authorisation and - potentially adding things into the authorisation process - to unintentionally but effectively killing-off an application.

And, while it is great to hear of a large digital asset player laying down the marker that Ireland will be its EU regulatory home, I have lost count of how may MiFID, emoney and payment firms that have told me that "Ireland is the only country for our company", only to find that their view changes during the course of the authorisation process for whatever reason. I've seen companies apply elsewhere while pursuing an application in Ireland and I have spoken to some of those companies 18 months latter when they discovered the grass wasn't greener in the other EU member state.

Against that backdrop, very interesting to read the Chair (Verna Ross) of European Securities and Markets Authority (ESMA) letter of 17 October 2023 to Nadia Calviño President of the Economic and Financial Affairs (ECOFIN) Council of the European Union, saying a number of important things about the MiCAR authorisation infrastructure.

Of the many points made by ESMA in its letter, the following ones caught our eye.

 

1. NCAs (national competent authorities) need to establish as early as possible their supervisory procedures related to the authorisation regimes set out in the MiCA Regulation, including simplified authorisation procedures for entities already authorised to provide crypto-asset services under national law.
2. each Member State to designate without delay the NCAs responsible for carrying out the functions and duties provided for in the MiCA Regulation.
3. that NCAs are granted adequate powers and resources to exercise their supervisory, investigative and enforcement responsibilities.
4. ESMA is concerned that an extensive use of the grand-fathering clause for entities already providing crypto-asset services would weaken the effectiveness of the MiCA rulebook. This is because the clause may allow these entities to continue operating for up to 18 months in accordance with applicable national laws.

• Copy of ESMA 17 October 2023 letter - HERE
  
• Linkedin Post - HERE

The letter was cced to:

* Mairead McGuinness, Commissioner in charge of Financial Stability, Financial Services and Capital Markets Union, European Commission;
* Irene Tinagli, Chair of the Committee on Economic and Monetary Affairs, European Parliament;
* John Berrigan, Director-General, DG Financial Stability, Financial Services and Capital
Markets Union, European Commission;
* Thérèse Blanchet, Secretary-General of the Council of the European Union
Union;
* Claudia Lindemann, Head of the Secretariat of the Committee on Economic and Monetary Affairs, European
Parliament