Provision of Advice Related to Crypto-Assets According to MiCA - Service Content

The Regulation (EU) 2023/1114 (MiCA - Markets in Crypto-Assets) is a key step forward in the regulation of crypto assets. The creators of the regulation aimed to bring clear rules for all entities in the EU that deal with crypto assets and related services. Did they succeed?

Given the short period since the MiCA regulation has been in force and the lack of insights from the interpretation and practical application of the regulation by national authorities, it is currently not possible to definitively assess its benefits. The real impacts can only be evaluated over time, particularly depending on the practical approach taken by the aforementioned national authorities.

At this moment, providers often have more questions than answers regarding the practical application of the regulation, for example, in relation to the scope of individual services described by MiCA, the specific obligations of providers, and the proper way to set up internal processes.

In this post, I would like to briefly focus on the content of the service of providing advice related to crypto assets, as described in Article 3, paragraph 1, point 24 of the regulation, as “offering, giving or agreeing to give personalised recommendations to a client, either at the client’s request or on the initiative of the crypto-asset service provider providing the advice, in respect of one or more transactions relating to crypto-assets, or the use of crypto-asset services”.

The first thing that stands out is the breadth of the definition, which includes recommendations both within the context of specific transactions and in the area of strategic decisions regarding investments in crypto-assets, not just at the direct request of the customer. However, the wording of the definition implies that the recommendations and advice should be personalised, based on a thorough understanding of the market and the individual needs of the customer.

Furthermore, one might ask which specific activities will fall under this definition and which will not. For example, whether general investment advice, which is not exclusively focused on crypto-assets but may include them as part of a broader portfolio, will be included.

From the provider’s perspective, the scope of advice under MiCA can indeed be quite broad. For instance, even a simple recommendation to use any additional services related to crypto-assets should be considered as advice, even if no subsequent transaction involving crypto-assets takes place. Typical activities within this service would then include providing various promotional and informational materials, responding to individual customer inquiries and requests, assessing their financial capabilities and investment plans, with the outcome being the identification of a suitable product or service in the area of crypto-assets.

Unlike trading and management, advising does not involve direct handling of crypto-assets, but rather the provision of information and recommendations that help clients make decisions. However, even here, within the business models of providers, there can be a relatively thin line between different activities, and various services may overlap. In the case of advising, we believe that providers’ activities may most often extend into services such as executing orders related to crypto-assets on behalf of customers, or receiving and transmitting orders related to crypto-assets on behalf of customers, depending on the specific technical procedures and solutions that providers implement within their business models.

The service of providing advice related to crypto-assets is also closely connected to the provision of crypto-asset portfolio management, where the specific obligations of providers engaged in these activities are further detailed in Article 81 of MiCA.

Providers of advice related to crypto-assets will therefore need to carefully assess their current processes and practices and proceed with greater caution to ensure they comply with the new rules.

For more information or a non-binding consultation regarding MiCA, do not hesitate to contact us at info@stuchlikova.com or by phone at +420 222 767 393.