​​New rules, new opportunities: Crypto’s next chapter in Greater Zurich under MiCA​

Dr. Glarner, great to have you with us today. Could you start by explaining what the MiCA regulation entails and why it's particularly relevant to the crypto industry right now? 

MiCA, which stands for Markets in Crypto Assets Regulation, was introduced to provide a harmonized regulatory framework for crypto assets in the EU. It's aimed at enhancing transparency, protection, and stability in the crypto market. Although it was enacted in June 2023, it will fully come into effect in January 2025. Given the rapid evolution of the crypto industry, it’s crucial to understand and prepare for these changes well in advance to ensure compliance.

With the upcoming enforcement of MiCA, what are the critical first steps that international companies should take if they are potentially affected by this regulation? 

The first step for any company is to determine if their activities fall under the MiCA regulations. This involves assessing whether they deal with crypto assets, e-money tokens, or asset reference tokens, as defined by MiCA. Understanding the specific category and requirements is critical for outlining the necessary compliance steps, including adjusting business operations and preparing relevant documentation like whitepapers.

You mentioned that MiCA also impacts non-EU based companies, particularly Swiss crypto firms. Can you elaborate on how these companies are affected and what specific actions they should take?

MiCA applies not only to EU-based entities but, as a market access regulation, potentially also to any company that serves EU customers. For Swiss companies, this means they must ensure their services meet MiCA standards if they target or serve EU clientele. Actions to consider may include conducting a notification of a whitepaper, a regulatory audit and establishing a operational presence within the EU to obtain licensing.

The concept of 'reverse solicitation' is quite critical under MiCA. Can you explain what this entails and how companies can navigate this aspect of the regulation?

Reverse solicitation allows companies not licensed under MiCA to serve EU clients who approach them independently. However, the EU is stringent about this exemption, focusing on limiting unsolicited outreach to EU clients. Companies must carefully document and manage client interactions to ensure they comply with these guidelines, avoiding any promotional activities that could be construed as solicitation.

Preparing for MiCA seems to be quite an intensive process. What are the most significant challenges international companies face during this preparation, and how can they effectively address these challenges?

The challenges include understanding the depth of regulatory requirements, aligning business models with MiCA standards, and the practical aspects of documentation and licensing. Effective preparation involves early assessments, possibly restructuring certain operations, and ensuring thorough documentation like the drafting of compliant whitepapers and authorization applications. This in an environment where most EU regulatory bodies have not yet adapted their internal processes to MiCA and have not been able to establish a practice on various open questions.

How should companies approach the requirement to create substance within the EU? What are the practical steps involved in building such substance to comply with MiCA?

Creating substance in the EU involves more than just a formal presence; it requires operational and economic activities in the region. However, regarding some of our neighboring European countries, in particular Liechtenstein, a large part of the Swiss substance may also be attributed to the EU presence which allows to build up an efficient and cost-saving operational structure, using the Swiss entity as the global hub for your business. Companies should therefore not only take their global business strategy into account when deciding on an European jurisdiction from which they want to enter the European market, but also operational efficiency. In any case, also from a Swiss tax perspective, it is important to ensure that decision-making processes occur within the EU.

Finally, what advice would you offer to international companies in the crypto sector considering expanding their operations to the Greater Zurich area considering the new MiCA regulations?

The Greater Zurich area offers a strategic entry point into the both the global as well as the European market, with a robust financial services ecosystem. My advice is to leverage local expertise, substance and regulatory support to navigate MiCA compliance. Start by understanding the impact of MiCA on your business and aligning your business operations with the regulatory requirements and consider partnerships or advisory services that can facilitate smoother entry and operation within the EU market.