On a professional basis

6 July 2023

Original Recitals of the EU Regulation on Markets in Crypto-assets (MiCA) provided that “Any definition of ‘crypto-assets’ should therefore correspond to the definition of ‘virtual assets’ set out in the recommendations of the Financial Action Task Force (FATF). For the same reason, any list of crypto-asset services should also encompass virtual asset services that are likely to raise money-laundering concerns and that are identified as such by the FATF” (previous Recital (8) Proposal).

Although these Recitals have been amended, the underlying principle may nevertheless remain valid, since any EU instrument adopted in the field of crypto-assets must “contribute to the objective of combating money laundering and terrorist financing” which is the field supervised by the FATF. Moreover, “entities offering services within the scope of this Regulation [MiCA] should also comply with applicable anti-money laundering and counter-terrorist financing rules of the Union, which integrate international standards [of FATF]” (current Recital (8) MiCA).

The current text of the future AML regulation also provides that "the relevant Union legal acts should, where appropriate, be aligned with the International Standards on Combating Money Laundering and the Financing of Terrorism and Proliferation adopted by the FATF in February 2012 (the ‘revised FATF Recommendations’) and the subsequent amendments to such standards" (Recital (4) AMLR). Furthermore, it states "the scope of Union legislation should therefore be expanded to cover these entities, in line with the recent developments in FATF standards in relation to crypto-assets" (Recital (6) AMLR).

Considering the above, it would seem reasonable to seek some guidance in FATF documents on virtual assets in the absence of specific details within MiCA provisions about the condition here under analysis ("on a professional basis").

In principle, the terms “professional basis” imply that the crypto-asset services must be provided “as a business”. This means that the entity must offer any crypto-asset services to any natural or legal person (a) for commercial purposes (given they need to draw up a commercial policy - e.g. Recital (58) MiCA; Recital (8) MiCA; Article 60-7(g) MiCA; Article 62-2(o) MiCA; Article 77-1 MiCA); and (b) must do so on a sufficiently regular or continuous basis, rather than infrequently (by analogy, FATF Virtual asset Guidance, §60). This last subcondition aims entities whose primary or significant business activity involves the provision of crypto-asset services. It is meant to exclude those entities that may carry out such services on a very infrequent basis (only casually or incidentally) for non-commercial reasons from the CASP definition - possibly entities having a crypto-asset related activity as an ancillary to their main activity (by analogy, FATF, Virtual asset Guidance, §60).

This “regular basis” condition is reinforced by other MiCA's provisions according to which a CASP will have ita authorisation withdrawn in a situation where it has not provided crypto-asset services for 9 successive months (Article 64-1(c) MiCA).

Together, both subconditions seen above join the previously analysed CASP condition defining CASPs as entities "whose occupation or business is the provision of one or more crypto-asset services to clients".

Copyright © 2024 Ruben Mendes ( CASP ).