Regulation
Anticipating MiCA in Luxembourg: Big Changes Coming for Cryptocurrency Operators
At first sight
For those who follow cryptocurrency developments, it will come as no surprise that a major new law in Europe, the Markets in Cryptocurrencies Regulation (MiCA), is just around the corner and will start to apply from December 30, 2024.1
For more information on MiCA and its key implications for cryptocurrency issuers and cryptocurrency service providers (CASPs), please refer to our previous article on the topic.
However, it is less known that MiCA includes an optional transitional regime to avoid disruption for existing market participants. This allows Member States to grant a “grace period” of compliance to crypto actors already authorised under national rules.
Therefore, entities providing cryptographic services in Europe will need to start their MiCA journey by understanding whether and to what extent the Member State in which they are registered has decided to benefit from this transitional regime.
What does this mean in the Luxembourg context?
In May 2024, a bill number 8387 (“Draft Law”) was submitted to the Luxembourg Parliament, which set out the following to implement the MiCA into national law:
- The Commission de Surveillance du Secteur Financier (CSSF) as the competent authority responsible for supervising compliance with the MiCA;
- The transitional regime of Luxembourg; and
- Penalties for MiCA compliance violations.
As regards the transitional regime, virtual asset service providers (VASPs) registered on 30 December 2024 it will probably be benefit from a transitional period of 18 months,2 allowing them to provide cryptocurrency-related services in Luxembourg until 1 July 2026.
By opting for the maximum transition period of MiCA, Luxembourg has apparently reaffirmed its position as an innovation-friendly jurisdiction that meets the needs of its diverse market players. In comparison, Germany is likely to allow only 12 months and the Netherlands only six months for existing entities to transition to MiCA.
That said, the CSSF only supervises VASPs in Luxembourg for the purposes of combating money laundering and terrorist financing. Compliance gap For such entities the difference between their current situation and the MiCA requirements will be significant, especially for companies not yet regulated.
For this reason, we strongly encourage VASPs to act quickly to implement MiCA requirements, regardless of the additional time required to comply.
VASPs who decide to wait will also be able to face commercial consequences and lose their competitive advantage by not obtaining an EU passport. Providing crypto services in the EU market will only be possible with the full MiCA license, while entities remaining within the VASP regime will be limited to the Luxembourg market.
Existing VASPs that are not compliant with MiCA by July 2026, as well as newly licensed or notified CASPs under MiCA that are not compliant on an ongoing basis, will face serious fines pursuant to the bill of up to 5 million euros or 12.5% of the company’s total annual turnover.3