MiCA permission for order execution via crypto assets

This post first appeared as blog post at FIN LAW.

The Markets in Crypto Assets Regulation (MiCA) will subject crypto service providers in the European Union to numerous licensing and compliance requirements. The relevant regulations for crypto service providers will take legal effect after a transitional period of 18 months after they have already been announced in the Official Journal of the European Union on December 30, 2024. One of the future crypto services regulated by MiCA is the execution of crypto asset orders for clients. Without further explanation, the facts are conceivably broad. According to the definition of crypto services contained in the MiCA, the regulated execution of orders for crypto values ​​for customers should exist if the crypto service provider concludes agreements on the purchase or sale of one or more crypto values ​​for its customers. According to MiCA, the subscription of crypto assets for customers that are to be offered publicly for the first time or that are to be admitted to regulated trading should also be included. It is not mandatory that the agreement to be concluded by the crypto service provider is only brokered between the customer and a third party. Rather, the crypto service provider executing the order can also be the counterparty of its customer, for example if it acquires crypto values ​​on a crypto exchange in its own name for the account of its customer.

Requirements for a MiCA permission for order-executing crypto service providers

Crypto service providers executing orders for crypto assets for customers must also meet the general regulatory minimum requirements under MiCA in order to be able to obtain the necessary MiCA permission from BaFin. In addition to an appropriate and professional business organization and technically suitable and reliable managers, which all crypto service providers must have according to MiCA, regulatory initial capital of at least EUR 50,000 must be demonstrated. In addition, however, MiCA also sets specific regulatory compliance requirements for crypto service providers executing orders. According to the MiCA regulations, crypto service providers who execute orders for crypto values ​​for customers are primarily obliged to implement and observe a Best Execution Policy at all times. It is necessary in this respect that the crypto service providers always try to achieve the best possible result for their customers in terms of price, costs and the speed of order execution as part of their service provision. The obligation to provide the best possible execution also relates to the execution of the order itself and all other relevant factors in the individual case. Only in the case of specific instructions from the customer to the crypto service provider does the obligation to best execution only apply to a limited extent.

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Information obligations of order-executing crypto service providers towards customers

According to the MiCA regulations, crypto service providers who execute orders for crypto assets for customers must always inform their customers about the order execution principles established in their business processes. The information must be clear, unambiguous and in a manner that the customer can understand. Crypto service providers executing orders must explain how they specifically execute customer orders. The crypto service providers must also inform their customers accordingly in the event of significant changes to their execution principles. According to MiCA, crypto service providers must continuously monitor the effectiveness of their internal arrangements for order execution and their order execution policies in order to be able to identify any deficiencies and rectify them if necessary. Crypto service providers executing orders must obtain the express consent to the execution principles from their customers before the service is rendered. If the customer fails to give consent, the crypto service provider concerned may not execute orders for the customer.