Perspective by: Slava Demchuk, co-founder and CEO of AMLBot
All virtual asset service providers (VASPs) that are registered within the EU before 2025 must adhere to the Markets in Crypto-Assets Regulation (MiCA) requirements this year, but not all will succeed in doing so.
While MiCA provides a solid regulatory foundation for the cryptocurrency sector, it presents some challenges, particularly for emerging startups and smaller enterprises.
Examining Estonia’s experience with crypto licenses since 2017 suggests that approximately 75% of VASPs may need to halt their operations in the EU.
Estonia’s Journey with Crypto Licenses
Estonia was among the first EU countries to implement a crypto licensing framework in 2017. It was relatively simple and quick to obtain a crypto license (VASP registration), requiring no physical office, share capital, or demonstrated commitment to robust Anti-Money Laundering (AML) and Know Your Customer (KYC) measures. Consequently, by 2019, Estonia had issued nearly 2,000 crypto licenses.
However, starting in 2019, Estonia made several legal adjustments, introducing criteria akin to those of MiCA. As a result, many licensed crypto businesses struggled to meet the new standards and subsequently lost their licenses. Currently, Estonia boasts only around 45 licensed crypto firms.
The Present Landscape in the EU for VASP Registration
The licensing environment will undergo a major shift in 2025 when MiCA comes fully into effect, requiring all registered VASPs to meet consistent requirements regardless of where they are incorporated; failure to do so will compel them to cease operations.
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Many are likely to struggle with compliance, as demonstrated by Estonia’s past when 1,900 companies lost their VASP registrations. The loss of these licenses was attributed to several key factors:
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Size: A large number of registered VASPs were small entities comprising one to three people, primarily functioning on peer-to-peer platforms or over-the-counter. These firms typically lack the resources to adhere to the stringent MiCA requirements.
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Cost: The expenses associated with obtaining a MiCA license can be significantly higher. While VASP registrations in Poland or the Czech Republic could cost around 2,000-4,000 euros, a MiCA license usually ranges from 30,000 to 80,000 euros, depending on the business model and country of registration.
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Requirements: Businesses seeking a MiCA license must demonstrate the existence of numerous intricate processes, including AML/KYC protocols, data protection measures, and cyber resilience. This necessitates hiring multiple specialists and establishing comprehensive systems. Given the number of VASPs in Poland, the 1,600 registered entities will need to find an equal number of AML/compliance officers (one for each VASP) by July 2025 — the deadline for compliance — who possess the requisite knowledge and pass the fit-and-proper assessment. Achieving this will be exceedingly difficult.
Furthermore, MiCA imposes substantial share capital requirements that vary from 50,000 to 150,000 euros, contingent upon the services offered. Many currently registered VASPs are startups or small firms whose revenue may not sustain the development of necessary processes or meet these capital thresholds.
This situation leaves small businesses and startups ill-equipped to comply with MiCA.
Perspective by: Slava Demchuk, co-founder and CEO of AMLBot.
This article is intended for informational purposes only and should not be construed as legal or investment advice. The views expressed here are solely those of the author and do not necessarily reflect the opinions of any affiliated parties.