According to a limited Acuiti/Eventus survey of 68 firms, only 9% reported feeling generally prepared for MiCA regulatory requirements. This metric reflected overall readiness, not cost-preparedness specifically. While MiCA regulation can provide better legal clarity, it comes at a high cost.
This is especially true for virtual asset service providers (VASPs). Setting your business under the MiCA regulation is a costly process that your startup may be unable to afford.
Dive into our post to learn more about MiCA crypto compliance costs for VASPs.
Is MiCA Compliance Too Costly For Your VASP?
The MiCA regulation licensing process offers better protection to your business and customers, but with significant set-up costs. A key feature of MiCA licensing is that VASPs need to issue a whitepaper and get a crypto asset license.
Filing for a license may seem straightforward, but getting a whitepaper requires you to spend €35,000 to €75,000. You also have to consider other MiCA compliance costs, such as:
- Legal and licensing fees: €40,000 to €100,000+, depending on jurisdiction
- Capital reserves: €50,000 to €150,000
- Staffing: Full-time local compliance team costs
- Time-to-market delays: 6 to 12+ months for approval, during which you may not be able to operate, leading to revenue loss
The EU Commission estimated €2.8M–€16.5M for newly regulated crypto-asset issuers subject to full whitepaper and governance requirements, though costs vary significantly by VASP type. This cost is significantly high for early startups, leading to entry barriers for small businesses in the EU.
Is MiCA Compliance Too Costly For Your VASP: A Budget-Friendly Solution
MiCA compliance cost may seem too high for your newly launched VASP. Having alternative solutions can help you generate profits while preparing for obtaining the Markets in Crypto Assets Regulation license eventually.
The top solution to avoid high MiCA costs is to try the Canadian fintech system. FINTRAC's MSB registration process allows startups and well-established VASPs to operate in Canada and other countries. This system is also appealing because of its well-regulated regime for virtual asset providers without high costs.
Is A FINTRAC MSB Registration Too Costly For Your VASP?
A FINTRAC MSB registration will not be too costly for your VASP because of more flexibility. MiCA regulation requires VASPs to have a physical office and team in the EU, adding to business set-up costs.
FINTRAC requires a physical Canadian business address with staff available during business hours, but does not mandate a large, dedicated office or an expensive, on-site full-time compliance team.
You can outsource your compliance officer role and keep operational overhead lean. Such flexibility means you don't have to spend a fortune on hiring full-time staff or paying for an office space.
FINTRAC MSB Registration Before MiCA Compliance: Key Benefits For VASPs
Some key benefits VASPs can enjoy with a Canadian fintech registration are:
- No local ownership requirement
- There's no fixed capital threshold for Canadian MSBs
- You can outsource compliance officers when needed instead of having a full-time officer, leading to lower salary costs
- A Canadian MSB registration can support banking access, though many institutions remain cautious about serving crypto-related businesses
FINTRAC MSB registration is recognized internationally. You can use the registration to de-risk your eventual MiCA expansion by launching and testing your services in a fully regulated environment beforehand.
How Does FINTRAC MSB Registration Help You Prepare For MiCA Regulation?
FINTRAC MSB registration is budget-friendly and fast, but it's still a serious regime. To register your fintech, you must meet money service business requirements:
- Every VASP has to file large cash transaction reports if it receives $10,000 in transactions or more
- All suspicious transactions have to be reported to FINTRAC on time
- VASPs must keep transaction records for at least five years
- All VASPs have to undergo strict AML program reviews by FINTRAC and ensure they're meeting KYC requirements
The Canadian regulatory agency conducts sudden audits regularly and imposes penalties for non-compliance. By meeting these requirements and setting up robust AML programs, you can prepare for audits for MiCA compliance.
Building an AML program for FINTRAC means that you can later use those policies for MiCA after making slight changes specific to the EU's framework. You will also have better credibility among investors and regulators when expanding from Canada to Europe.
FINTRAC MSB Registration: How To Register As A VASP In Canada?
Registering with FINTRAC as a crypto MSB involves:
Step 1: Determine The Scope of Services
You'll qualify as a MSB in Canada if you:
- Deal in virtual currency
- Operate a crypto exchange
- Offer wallet or custodial services
If your business meets these criteria, you can start the FINTRAC MSB registration process.
Step 2: Incorporate Your Company
VASPs aren't required to incorporate in Canada when registering a MSB. Despite that, many foreign firms prefer to incorporate federally through Corporations Canada or provincially, with BC and Ontario being common choices.
You can consult a fintech law firm before incorporating your business to ensure it's the best step.
Step 3: Appoint A Compliance Officer
FINTRAC requires every MSB, including VASPs, to appoint a compliance officer to implement AML/CTF policies. You can hire a full-time employee residing in Canada or outsource an officer during audit periods.
Step 4: Build A Compliance Program
Your AML/ATF compliance program must include:
- Risk assessment approaches
- KYC procedures
- Ongoing monitoring of AML policies, employee training, and FINTRAC compliance
- Recordkeeping of regular transactions, large cash transactions, and suspicious transactions
- Reporting obligations for suspicious and large cash transactions
Step 5: Submit the FINTRAC Application
The online registration process includes:
- Business details
- Ownership and control information
- Nature of MSB activities
- Compliance documentation
Once all your documents are ready, you can use FINTRAC's online portal to submit your MSB registration request. Within five to six months, you can expect a reply about approval.
Is MiCA Compliance Too Costly For Your VASP? Try Canada With Our Law Firm's Help
MiCA compliance is a serious task for which you must be thoroughly prepared. If you're uncertain about the new regime's policies and whether your business will receive approval, you can try Canada.
Operating under Canada's fintech regime will help you gain experience working in a well-regulated crypto environment. You can operate legally, access financial infrastructure, and buy time to prepare for larger markets like the EU.
Reach out today to explore whether a Canadian launch is the right path for your VASP.
