This post first appeared as Blog post at FIN LAW.
The European Markets in Crypto Assets Regulation (MiCA) will gradually replace the national regulation of crypto services this year. On December 30, 2024, the rules of the EU regulation will apply to all CASPs in Europe. Thanks to various transitional regulations, not everyone will have to have a MiCA license. However, planning the transition to the new regulatory regime already makes sense. A crypto service that is significantly more advanced compared to traditional regulation in the financial services sector under MiCA is advice on crypto assets.
According to the regulations currently in force in Germany, investment advice only covers advisory services for transactions relating to financial instruments and also crypto assets. However, advice on crypto-assets under MiCA will go well beyond this and, in addition to advice on transactions relating to crypto-assets, will also regulate advice on the use of crypto-assets. Anyone who gives customers personalized recommendations to use certain crypto services from December 30, 2024 may, as a crypto advisor, be subject to a permit requirement under MiCA and may have to obtain a BaFin license for this activity beforehand.
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When can the permission requirement for provider recommendations apply?
In particular, crypto service providers who advertise third-party crypto services as part of their own line provision may, in individual cases, constitute crypto advice. This would be conceivable, for example, in cases in which a crypto trading platform introduces its customers to the services of various crypto custodians or a provider of crypto exchange services presents the use of the services of various portfolio managers for crypto assets. In order to trigger the authorization requirement with regard to crypto advice, it is always necessary that personalized recommendations are given to the customer.
It will therefore not be enough to simply name several different providers of a crypto service. MiCA approval may only become necessary if an advisory element is added. If statements are made that suggest to the customer that a certain crypto service provider would be particularly suitable for this customer compared to others, the crypto advice can be in the form of a provider recommendation. However, whether the recommendation to the customer is actually tailored to him, based on his specific portfolio, his investment preferences and his personal risk profile, should not matter.
What is more important is how the recommendation appears from the customer’s perspective. Referrers should therefore exercise caution when making statements that are intended to make the customer believe that using a particular crypto service is a perfect fit for them or meets their specific needs.
What should referrers from crypto service providers pay attention to in the future?
In any case, referrers should take the permission requirement under MiCA for crypto advice in the provider recommendation variant seriously and design their entire customer communication with this in mind. In all advertising statements that deal with the offerings of third-party crypto service providers, referrers should ensure that under no circumstances can the customer be given the impression that the third-party provider’s recommendation was made taking into account the customer’s personal circumstances.
The more general the advertising statement, the lower the risk of accidentally providing crypto advice that requires authorization. For influencers who make recommendations via public channels, the risk of providing crypto advice regulated under MiCA is low, as they cannot make personalized recommendations because their listeners are usually unknown to them.
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