A month ago, we wrote that the collapse of the German government coalition created problems in the implementation of the European cryptocurrency regulation MiCA, as it failed to pass legislation. However, on Wednesday, the German Parliament (Bundestag) finally passed the draft law on the digitalization of financial markets (Finanzmarktdigitalisierungsgesetz de FinmadiG). Apparently this was added to the agenda at short notice. Parliament has responded to industry demands to ensure legislation is in place before MiCAR comes into full force on December 30.
FinmadiG is not only about crypto and MiCAR, as it also impacts other EU laws such as DORA and the Fund Transfer Regulation. However, for MiCAR, he introduced the Crypto Market Supervision Act (KMAG), the piece of legislation that supersedes the old German crypto rules with MiCAR.
Technically, MiCAR is a regulation, so it does not require local laws. However, legislation was needed to designate BaFin as regulator. Without this, BaFin would not be able to issue licenses. This would have allowed European companies with crypto licenses from other countries to operate in Germany, but German companies would not have been able to operate in the EU.
Additionally, MiCAR has grandfather clauses allowing businesses with existing licenses to continue operating for a period of up to 18 months, with each jurisdiction deciding the transition period. The new German legislation specifies one year.
Different EU MiCAR transition periods
However, this week, European regulator ESMA noted that the different transition periods mean that crypto asset service providers (CASPs) must obtain new authorizations under MiCAR as soon as possible. For example, if a German PSAP does not have a new license by July 2025, it will not be able to operate in EU countries that have imposed a six-month transition period. This includes Latvia, Hungary, the Netherlands, Poland, Slovenia and Finland. The transition in Lithuania lasts five months and four jurisdictions had not specified the timetable when ESMA published its note.
We believe ESMA may have responded to a letter from the Electronic Money Association (EMA) and three European cryptocurrency trading bodies. They highlighted that the latest regulatory technical standards for authorization were only approved by the European Commission at the end of October. This does not leave much time for national authorities to adopt them or for PSAPs to apply them.
