Capital Requirements for Crypto-Asset Service Providers

MiCA imposes prudential safeguards on Crypto-Asset Service Providers designed to ensure they can absorb losses and wind down in an orderly manner if necessary. Central to this is a minimum capital requirement that varies according to the type of services a CASP is authorised to provide.

Tiered Capital Requirements

MiCA sets out different minimum own funds requirements depending on the risk profile of the services offered. Firms providing services that do not involve holding client assets or operating a trading venue are generally subject to lower minimum capital than firms that provide custody, operate a trading platform, or exchange crypto-assets against funds, reflecting the greater potential exposure and operational risk of those activities.

The Higher of Two Measures

In addition to the fixed minimum capital figure, CASPs must also meet an ongoing requirement based on a quarter of their fixed overheads from the previous year, and must hold own funds equal to whichever of the two measures is higher. This means capital adequacy is not a one-off calculation at authorisation but an ongoing monitoring obligation.

Composition of Own Funds

Own funds must generally consist of high-quality capital instruments, in line with prudential standards adapted from the broader EU financial services framework, rather than illiquid assets or crypto-assets that could themselves be subject to significant price volatility.

Planning Considerations

Applicants should model their capital requirements early in the application process, factoring in both the fixed minimum and the fixed-overheads test, and ensure their business plan demonstrates a credible, funded path to meeting these requirements on a continuing basis, not merely at the point of authorisation.

Enalian advises crypto-asset businesses, investment firms and payment institutions on MiCA authorisation, notification and ongoing compliance in Cyprus. If you are planning a CASP application or reviewing your regulatory status, our team can guide you through the process. Get in touch with our team to discuss your specific circumstances.

This article is provided for general informational purposes only and does not constitute legal, tax or regulatory advice. Regulatory requirements are subject to change; readers should seek specific advice on their circumstances before taking action.