MiCA and the supervision of service providers

What MiCA is and why it came

MiCA (Markets in Crypto-Assets) is an EU regulation that applies directly in every member state. Before it, crypto operated in Europe without common rules: each country had its own interpretation, and investor protection varied.

MiCA creates a single rulebook for issuers and service providers: authorization, capital, transparency and protection of customer assets. The goal is twofold: to protect investors, and to make the crypto market a reliable part of the financial system.

Three categories

MiCA divides crypto-assets into three groups with different rules. The classification decides what is required of the issuer.

CASP: the crypto-asset service provider authorization

CASP is MiCA's term for a company that provides crypto services: custody, trading, exchange, order execution or advice. Authorization requires capital, competent management, risk management, segregation of customer assets and compliance with best execution.

Supervision is carried out by a national authority (in Finland, the Finnish Financial Supervisory Authority, FIN-FSA), and the most significant players are also supervised by EU-level authorities. An authorization is not a formality but an ongoing obligation that is supervised.

One advantage is passporting: an authorization granted in one member state is valid throughout the EU. For the customer, this means the same rules apply whichever country you use the service in.

One authorization is not always enough

The market is moving toward multi-asset services: trading in securities and payments alongside crypto-assets. In that case a single CASP authorization covers only part of the business.

Why the industry is consolidating

Compliance costs money: maintaining an authorization, capital requirements, auditing and reporting. The costs are roughly the same whatever the size of the firm, so a large one spreads them over more customers, while for a small one they weigh relatively more.

The result is mergers, acquisitions and market exits. This is not a sign of crisis but of maturing; the banking sector went through the same development in its time. What matters for the customer is that an unauthorized firm is not covered by MiCA's protection: check your service provider in the register, and move your assets to an authorized provider or to your own wallet if the authorization is missing.

What regulation does not do

MiCA brings supervision, capital requirements and protection of customer assets. It does not remove investment risk, does not guarantee a price and does not bring crypto under the deposit guarantee scheme. A regulated firm is unlikely to disappear overnight, and if its business ends, that happens in an orderly way under supervision. But the price can still fall by any amount.

In marketing, this also means that no unfounded urgency or fear may be created. The question is simple: choose a provider that tells you openly how your assets are protected.

This content is for information purposes only and should not be construed as investment advice or a recommendation. Investing always involves the risk of losing capital. The value of financial instruments and investments can go up or down, and past performance is no guarantee of future returns.