This post first appeared as Blog post at FIN LAW.
The crypto industry is currently in a consolidation phase. With increasing regulation and an increasingly harsh general economic environment, some of the past leaders are finding themselves in trouble, while new players and institutions from the traditional financial world are positioning themselves to take over. Established financial institutions in particular are currently looking for ways to position themselves for the crypto market and the field of tokenization. An obvious opportunity is the takeover of existing crypto service providers.
The acquisition of crypto service providers regulated in Germany according to the Banking Act (KWG) or the Securities Institutions Act (WpIG) requires a successful owner control procedure at BaFin, in which the authority must approve the acquisition by the interested buyer. Even if a shareholding in a crypto service provider is increased, which leads to a shareholding of more than 20 or 50%, an ownership control procedure must be carried out at BaFin. In the future, there will be EU-wide regulations for investments in crypto service providers Markets in Crypto Assets Regulation (MiCA) give. But how will the owner control procedure work under MiCA?
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BaFin must evaluate the planned takeover in MiCA owner control procedures
The regulations regarding the acquisition of crypto service providers regulated under MiCA will come into force on December 30, 2024. Then the responsible supervisory authority – in Germany, BaFin – will have to assess whether there are reasons against the takeover before each planned takeover in an ownership control procedure. The owner control procedure according to MiCA will have to be completed if the interested buyer would hold a stake of more than 20, 30 or 50% of the capital or voting rights in the crypto service provider following a planned takeover. The owner control procedure is initiated by the interested buyer, who is obliged to submit a written report to BaFin.
However, the seller of shares also has an obligation to report if the planned sale would cause his shareholding in the capital or voting rights to fall below the threshold of 10, 20, 30 or 50%. BaFin will have 60 working days from receipt of BaFin’s confirmation of receipt to assess the planned takeover. In the MiCA owner control procedure, BaFin can consult the Financial Intelligence Unit (FIU), which is responsible for processing suspected money laundering reports, in order to check whether the planned takeover could conflict with money laundering prevention concerns.
What information must be submitted to BaFin for owner control under MiCA?
MiCA does not expressly regulate which specific information and evidence must be transmitted to BaFin as part of the owner control procedure under MiCA. Rather, MiCA obliges ESMA to develop technical regulatory standards in which the documents and evidence to be submitted are to be specified. It can be assumed that, in addition to the requirement for CVs, certificates of good conduct and other evidence documenting the reliability of the acquirer and the people behind him, descriptions of the acquirer’s current and future business activities as well as information on his financial circumstances will also have to be submitted.
In any case, according to the MiCA regulations, the responsible authority should check in the owner control procedure whether the interested buyer is reliable and the people who actually manage the crypto service provider’s business are professionally suitable. The subject of the review will in particular be whether the crypto service provider is likely to be able to fulfill all of the supervisory obligations under MiCA even after the planned takeover. In cases where there is sufficient suspicion that the planned takeover is for the purposes of money laundering or terrorist financing, the competent authority will not be able to approve the takeover.
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