Internal Controls under MiCA: Your Shield Against Sanctions, Shutdowns, and Financial Losses

In a previous publication, we discussed the essential role of internal controls in ensuring regulatory compliance. Today, let’s go further by exploring the minimum requirements, key components, and best practices to strengthen your internal control framework under MiCA.

Internal Control : A Fundamental Obligation

According to MiCA, all Crypto-Asset Service Providers (CASPs) must establish a robust internal control system to mitigate risks, ensure operational resilience, and prevent regulatory breaches.

This system must:

📍 Detail policies and procedures implemented to ensure compliance with regulatory obligations.

📍 Explain internal monitoring processes, ensuring independence and the ability to escalate major risks to senior management.

📍 Establish a clear and secure data and transaction archiving system.

📍 Implement whistleblowing mechanisms for employees to report potential violations.

Minimum Requirements for Internal Control

For an internal control framework to be effective, it must meet the following criteria :

✅ Dedicated Oversight : A senior executive must be assigned to implement, maintain, and monitor the internal control and risk management framework to ensure effective supervision.

✅ Clear Segregation of Duties: To prevent conflicts of interest, no single individual or team should be responsible for tasks that could create conflicting interests.

✅ Enterprise-Wide Coverage: Internal controls must encompass all business units, including regulated activities.

✅ Monitoring of Outsourced Services : Any outsourced activities must also be subject to internal control. Regulators pay special attention to outsourcing, as it increases risks. Proper supervision and safeguards must be in place.

Core Components of Internal Control

An effective internal control framework includes :

• Risk Management – Identifying, assessing, and mitigating risks related to crypto operations.

• Compliance – Ensuring full alignment with MiCA regulatory requirements.

• Internal Audit (if required) – Conducting periodic reviews of the control system’s effectiveness.

  
  

📜 Policies & Procedures : A Structured Framework

CASPs must establish detailed internal policies that define :

📍 The roles and responsibilities of each internal control function.

📍 Operational processes and procedures to ensure regulatory compliance.

📍 A mechanism for periodic reviews and updates to adapt to regulatory changes and evolving business operations.

📌 Reporting & Incident Monitoring

• Annual & Ad Hoc Reports : Compliance and internal audit reports must be submitted at least once a year to senior management—or more frequently in case of necessity.

• Incident Reporting Mechanisms : Systems must be in place to escalate identified failures to the executive board and enable assessment in collaboration with operational managers.

Why Strengthening Internal Controls is Critical

A well-structured internal control system isn’t just about compliance—it’s your first line of defense against financial, reputational, and operational risks.

Neglecting these controls could result in heavy fines, service suspension, or even business closure.

🔹 Be proactive—anticipate risks before they materialize.

🔹 Stay compliant—regulators are watching closely.

🔹 Protect your business—strong governance ensures long-term sustainability.

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