The Estonian Finantsinspektsioon (EFSA) is actively preparing for the implementation of MiCAR. As a national competent authority, the FI will be responsible for to authorization and supervising of crypto-asset service providers in Estonia. In light of emerging risks, only those companies that are transparent, honest, have a high level of integrity, and pay due attention to compliance, AML/CFT requirements and quality of services will be eligible for a license.
According to MiCAR Article 3(16), provision crypto-asset services are defined as follows:
Crypto-asset service provider – a legal person or other undertaking whose occupation or business involves the provision of one or more crypto-asset services to clients on a professional basis, and that is accordingly allowed to provide crypto-asset services.
Crypto-asset service’ means any of the following services and activities relating to any crypto-asset:
providing custody and administration of crypto-assets on behalf of clients;
operation of a trading platform for crypto-assets;
exchange of crypto-assets for funds;
exchange of crypto-assets for other crypto-assets;
execution of orders for crypto-assets on behalf of clients;
placing of crypto-assets;
reception and transmission of orders for crypto-assets on behalf of clients;
providing advice on crypto-assets;
providing portfolio management on crypto-assets;
providing transfer services for crypto-assets on behalf of clients;
Currently, the Finantsinspektsioon is not granting authorization to companies involved in the issuance of crypto-assets or the provision of related services within Estonia since it is still in the FIU domain.
Given that the EFSA assessment will be largely based on the same foundations as FIU did, we can draw out from practice and the recommendations published at various seminars the most important circumstances that must be taken into account when applying for a new MiCA license.
The imminent task of licensing and overseeing specific participants in the crypto-asset market, following MiCA regulations, underscores the imperative of managing the inherent risks of these markets. It's important to emphasize that only enterprises demonstrating unwavering transparency, integrity, and a robust commitment to compliance with Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) regulations, among other essential criteria, will merit consideration for licensure.
These prospective crypto-asset market participants must convincingly demonstrate several key attributes:
- Executive Integrity and Competence: The leadership cadre and shareholders must exude impeccable integrity and collectively possess the requisite knowledge, skills, and experience to adeptly steer the business, while also dedicating ample time to their fiduciary responsibilities.
- Adherence to Governance Principles: A profound understanding and steadfast adherence to the principles of good governance are non-negotiable. This includes adeptly managing conflicts of interest, delineating performance and control functions, and fostering transparent, forthright cooperation with supervisory authorities.
- Legal Acumen: Management personnel must not only grasp the legal intricacies stipulated in MiCA but also possess a comprehensive understanding of Estonia's national legal landscape and regulatory environment.
- Financial Integrity: The legitimacy of funds employed to finance business activities or secure holdings within a crypto-asset market participant must be unassailable, substantiated by an unbroken chain of verifiable documentation. Finantsinspektsioon will also conduct thorough due diligence on shareholders' business track records and proposed financial frameworks.
- Operational Substance: Establishing a robust operational center within Estonia tailored to the envisioned business model is paramount. The institution must transcend being a mere 'empty-shell' entity, avoiding over-reliance on third-party outsourcing for core activities.
The licensing process under MiCA will adhere to rigorous standards akin to those governing traditional financial market participants. Incomplete, inadequately prepared, or factually erroneous applications will not warrant consideration for evaluation. Finantsinspektsioon remains steadfast in upholding exacting standards of quality and expects nothing short of meticulous preparation, unequivocally denouncing any attempts to subvert the integrity of the licensing procedure.
With Finantsinspektsioon assuming the mantle of the national competent authority for licensing and oversight under MiCA, the full implementation of this Regulation awaits the activation of pertinent requirements, underscoring a pivotal milestone in ensuring the robust regulation of crypto-asset markets.