MiCA & PSCA: Client Fund Separation is Mandatory! Here’s Why It’s Crucial 🚨

The MiCA (Markets in Crypto-Assets) regulation imposes a key requirement on Crypto-Asset Service Providers (CASP) :

👉 Client funds and crypto-assets must be separated from the company’s own assets.

This obligation has major accounting and regulatory implications for businesses in the #CryptoBusiness sector and is part of the broader framework of #CryptoCompliance.

📌 Why is this obligation essential?

The goal of this rule is twofold :

✅ Protect investors and clients in case of insolvency of the service provider.

✅ Prevent mismanagement and ensure greater transparency in the #DigitalAssets ecosystem.

In an environment where #CryptoRegulation is becoming a strategic issue, compliance with these obligations is essential to ensure the sustainability of CASP and to build trust with investors.

🚨 What are the risks for CASP in case of non-compliance?

Failure to comply with this obligation exposes #CASP to severe penalties, including :

✅ Administrative sanctions and fines 💰

✅ Suspension or revocation of the license 🛑

✅ Ban from holding executive positions 🚫

📜 Regulatory reference: Article 111 of the #MiCA regulation

These measures aim to ensure compliance and mitigate systemic risks associated with poor management of #CryptoAssets held on behalf of clients.

📜 What does the MiCA regulation say exactly ?

The EU Regulation 2023/1114 MiCA enforces this separation requirement in Articles 70 and 75 :

🔹 Article 70 : Custody of Crypto-Assets and Client Funds

✔ #CASP must take appropriate measures to protect clients' property rights, especially in case of insolvency.

✔ Client crypto-assets cannot be used for the provider’s own purposes.

✔ Client funds must be deposited in a credit institution or central bank and held in separate accounts from those of the #CryptoBusiness.

🔹 Article 75: Custody and Administration of Crypto-Assets on Behalf of Clients

✔ #CASP must establish clear agreements with their clients, defining their commitments regarding the custody and administration of #DigitalAssets.

✔ A record of client positions must be maintained to ensure full transparency.

✔ Client crypto-assets must be functionally and legally separated from the provider’s assets.

🔎 How to Ensure Optimal Accounting Compliance?

To comply with #MiCA, a #CASP must implement a rigorous accounting framework, including :

👉 Separate accounts for company funds and client funds.

👉 A structured accounting plan aligned with regulatory requirements.

👉 Strict internal controls to track all financial flows.

These best practices not only help avoid sanctions but also enhance financial management and increase credibility with clients and investors.

🚀 An Opportunity for CASP ?

Although this new rule is restrictive, it also represents a real opportunity for #CASP :

✅ Stand out from competitors by showcasing a transparent and compliant financial management approach.

✅ Reassure investors and clients by guaranteeing the security of their #CryptoAssets.

✅ Avoid sanctions and ensure long-term business stability by meeting #CryptoRegulation requirements.

📢 Planning to Apply for a PSCA License ?

If you are considering applying for PSCA licensing, this client fund separation requirement must be included in your application.We cover this topic in another article !

📩 Conclusion

The separation of client funds and company funds is now a mandatory regulatory requirement for all #CASP.

Failure to comply not only results in severe penalties but also presents a missed opportunity to structure and secure your business in a rapidly evolving #CryptoBusiness market.

💡 Need guidance to comply with MiCA? Contact us to learn more !

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