On 2 May 2024, the Central Bank of Ireland signalled a change in its approach to registering Virtual Asset Service Providers (VASPs) / authorising Crypto Asset Service Providers (CASPs) in Ireland.
Given that the Markets in Crypto Assets Regulation (MiCA) will apply to CASPs from 30 December 2024 and a period of at least ten months is required to conclude the assessment of an application for the registration of a VASP, the Central Bank considers that firms intending to provide crypto asset services should concentrate on preparing for a CASP application rather than seeking a VASP registration.
Background
Since April 2021, firms seeking to provide any VASP activities are required to be registered by the Central Bank as a VASP prior to commencing operations.
The current VASP regime relates solely to Anti-Money Laundering (AML), Countering the Financing of Terrorism (CFT) and Financial Sanctions (FS). Applicant VASPs are assessed only on the effectiveness of their AML/CFT/FS frameworks, policies and procedures and the fitness and probity of management and beneficial owners.
A CASP authorisation under MiCA will be significantly broader and more substantial than a VASP registration.
Transitional Period under MiCA
Under MiCA, firms registered and operating under the VASP regime before 30 December 2024 can avail of a transitional period to continue to operate for up to 12 months or until their CASP authorisation is granted or refused, whichever is sooner. This is known as "grandfathering".
Only firms that have been registered as VASPs, and provided their services in accordance with applicable law prior to 30 December 2024 can avail of the MiCA transitional arrangements.
All registered VASPs that intend to continue to operate following the 12-month transitional period, i.e., after 30 December 2025, will require a CASP authorisation from the Central Bank prior to this date.
A VASP availing of the transitional arrangements that does not apply for a CASP authorisation or whose application is refused will be required to cease VASP operations by 30 December 2025 or when their CASP application is refused, whichever is sooner.
VASP registration is no guarantee of CASP authorisation
The Central Bank has flagged to CASP applicants that a VASP registration provides no indication of the outcome of a CASP assessment. Moreover, a VASP registration does not lead to a simplified CASP assessment. The Central Bank views that all CASP applications will be deemed a new authorisation application and will be assessed under MiCA rules. However, of potential comfort to registered VASPs is the Central Bank's assertion that it will take existing supervisory history and engagement with a firm into consideration as part of the authorisation assessment.
Other
The Central Bank states that VASP applicants who have engaged with the Central Bank on a pre-registration basis have been advised of this in recent months.
For further information on MiCA please see our client briefing here.
How we can help
Our Financial Regulation team is already supporting firms who will be applying for authorisation under MiCA and has extensive experience securing the registration of VASPs and the authorisation of electronic money institutions, payment institutions and other regulated Fintechs. We have acted for one-third of the electronic money institutions which have been granted authorisation in Ireland to date.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.