This is how crypto service providers register with BaFin

This post first appeared as Blog post at FIN LAW.

At the end of this year, MiCA’s crypto services and crypto service providers (CASP) regulations will become applicable. The German legislator is already taking a position and has now published a government draft for a crypto market supervision law (KMAG), which is intended to regulate that and how BaFin will process applications for permission according to the MiCA should edit. For market participants, the switch to MiCA means that they may have to go to the supervisory authority again in order to create the conditions for a regulatory-permissible offer of crypto services once the MiCA regulations come into effect.

However, not all crypto service providers will have to submit a basic initial application to BaFin. For companies that already hold a license under the currently applicable national crypto regulation or under applicable supervisory law, MiCA provides for simplified procedures for obtaining the required BaFin license. But what types of procedures are available to individual crypto service providers?

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Complete application for BaFin license according to MiCA required for initial registration

As expected, the most difficult type of procedure is used in the case of companies that are still operating unregulated. Such crypto service providers will have to submit a complete application for authorization to BaFin and will only be allowed to operate once BaFin has granted the requested license. Evidence must be provided of the regulatory initial capital required under MiCA, a proper business organization that covers all MiCA requirements applicable to the crypto service to be provided and a viable business plan for the planned business model.

The managers of the crypto service provider must be professionally qualified and reliable. Likewise, the shareholders and owners of the applying company must be reliable and provide appropriate evidence. According to the provisions of MiCA, BaFin should confirm receipt of an application for authorization within 5 working days and then inform within 25 working days whether the application is complete. If this is not the case, BaFin must set the applicant a deadline for improvement at its own discretion. If the application is still incomplete after the improvement period has expired, BaFin may reject the application. BaFin, on the other hand, must decide on a complete application within 40 working days.

Banks and investment firms benefit from a simplified procedure for the MiCA license

MiCA provides considerable relief for banks and investment firms that already have a BaFin license for their business operations. As of the legal effect of MiCA, credit institutions will also be allowed to provide crypto services if they notify BaFin of this at least 40 working days before offering the crypto services for the first time. A standalone MiCA license is not required. In particular, the communication must contain a viable business plan with regard to the crypto services to be provided and also describe how the bank’s business organization will be crypto-specific in the future with regard to the crypto services.

After just 20 working days, BaFin must inform you whether the notification is complete. As soon as the notification is complete, the credit institution may provide the planned crypto services. Investment firms can also benefit from this simplification, but based on the notification procedure they are only allowed to provide crypto services for which they have the appropriate authorization as an investment firm. There is also a special feature for companies that are allowed to provide crypto services under national law on December 30, 2024 and apply for a MiCA license from BaFin by July 1, 2025 at the latest.

Such companies – such as crypto custodians with permission under the KWG – only have to prove to BaFin that they fulfill the additional obligations resulting from MiCA for their business model in order to receive the MiCA license. A complete application does not then have to be submitted.