MiCAR Industry Briefing- Remarks by Gerry Cross, Director of Capital Markets & Funds

Good morning. I am delighted to welcome you to the Central Bank of Ireland today for an engagement on the Markets in Crypto Assets Regulation (MiCAR) and its implementation. And in particular on the path to success in MiCAR authorisation.

Recent years have seen tremendous innovations in financial services. Amongst the most notable have been the development of blockchain-based technologies.

Over the past five years, the European Commission has implemented its digital finance package. This has included legislation on crypto-assets: the Markets in Crypto Assets Regulation (MiCAR); and on digital resilience in the form of the Digital Operational Resilience Act (DORA). Both of these have recently come in to effect.

This digital finance package reflected the EU’s ambition to embrace a digital transition for the benefit of citizens and to help modernise the European economy across sectors. And to turn Europe into a global digital player. In effect, to realise the opportunities within innovation, while managing the risks.

This is something to be highly valued and to build on for the further success of the European economy in these challenging times. Times when technological innovation, effectively deployed, will be at the heart of future economic and societal success.

At the Central Bank of Ireland, we have been strong supporters of the EU’s ambitions in this area and we have played very active, even leading roles, in the development and implementation of this legislation.

MiCAR itself is a very important step forward in the regulation of crypto activities in Europe. It introduces for the first time, what aims to be comprehensive regulatory framework for crypto assets and their operational ecosystem.

This morning’s event is an excellent opportunity for us all as participants with different roles in the innovation ecosystem to exchange views. It comes as we navigate an important moment in the MiCAR story: its initial phase of implementation including the first wave of authorisation applications from intending Crypto Asset Service Providers (CASPs). It builds on our last industry wide engagement on MiCAR last July. 

A key purpose of our event this morning is to facilitate a conversation. It is designed in particular to provide further support to industry participants who are in the process towards obtaining Central Bank authorisation as MiCAR firms, or who may be thinking about applying for such authorisation.

Importance of MiCAR

MiCAR aims to provide a clear and consistent framework for the regulation of crypto assets and related services across the EU. It also sets the benchmark at a global level, contributing to informing the work of other jurisdictions in their thinking and approaches to setting regulatory standards for crypto assets and related services.

Delivering on MiCAR, in a timely outcomes-focused way, is a key focus for the Bank and supervisory authorities across the EU.

For our part, we want the future financial system to deliver for consumers, investors, business and the wider economy.  A well-functioning and robust crypto sector that delivers on the promise of innovative products, can be part of that.

Ireland as a financial centre could become an important location for crypto asset service providers, as it has been for virtual asset service providers (VASPs). This reflects our existing strengths in both the areas of digital technology and financial services. It reflects broader aspects such as our commitment to Europe, and can I also say, our reputation for, and commitment to, strong, well-designed and outcomes-focused financial regulation.

The Regulatory Perspective

I am often asked: how does the Central Bank of Ireland think about MiCAR and cryptoassets? When you stand back at the end of the day what is your perspective on this new area of regulated financial service? Let me take a moment to share some thoughts on this.

Firstly, innovation, including technological innovation, is both very important and very hard. It may be amongst the most difficult things to do: to develop a new idea, to bring it to commercial viability, and then to scale it to being an economic success story. We only have to look at Mario Draghi’s report on EU competitiveness published in September 2024 to know both how important innovation will be to the future of European economic success and the challenges we need to overcome if we are to create the conditions in which this can happen.

As I have mentioned crypto technology, the blockchain, distributed ledger, tokenisation, Web3 these are a set of related innovations, which, when we look back, are likely to have been at the heart of a very important wave of technological development. Both in themselves, and in what they will lead to, they represent a significant crossing of the technological frontier.

The introduction of MiCAR places Europe in a very good position to benefit from this broad area of technological innovation. This of course requires that MiCAR is implemented well and in a way that is closely aligned with the delivery of its objectives. And this is very much where and how we see the role of the Central Bank of Ireland. We see our role as implementing MiCAR in a way that supports its successful delivery of the outcomes that it is seeking to deliver.

And of course when we implement any regulatory framework, and in how we supervise, we are outcomes focused. The outcomes we seek at a general level are a financial system which functions well in support of consumers and users and the wider economy. It should be trusted to operate in customers’ interests, to be resilient, and to avoid being used for financial crime and money laundering. These are all things which the public expects of financial sector. And it is not only in their interests but in the interest of the sector itself that they are achieved.

Guided by these outcomes, amongst the things that we are focusing on in implementing MiCAR are:

• Governance and culture: In 2022, we saw the “Crypto Winter” where investors and consumers experienced the negative impacts arising from a lack of good governance and poor culture in certain parts of the sector.

• Consumer interests. Our revised Consumer Protection Code was launched this week. At its heart is the obligation for regulated financial firms to secure their customer’ interests. This means that at all stages, from the development of a business model and strategy, through product design and marketing, and after sales, firms must ensure that what they are offering and doing is well aligned with their customers’ reasonable expectations and with their interests.

• Risks to consumers and investors are inherently high in some crypto and related services and crypto markets have been noteworthy for their significant volatility. While representing important progress, MiCAR will not provide the same levels of protection as exists for traditional financial investment products, nor will it enable mitigation of all the risks linked to crypto-assets.

• Regulators, including ESMA and ourselves, have issued a set of warnings to consumers concerning crypto markets. We have expressed scepticism about business models where profitability is driven from the heavy marketing, offering and distributing of unbacked crypto to retail customers for speculative purposes. Where we see higher inherent conduct and investor protection risks in the products offered to customers and investors, we will have higher expectations of firm’s ability to manage these risks.

• Crime and fraud. 2025 has already seen an enormous theft event of crypto assets in another part of the world. This underscores the importance of high levels of security, without which the sector will not flourish. More broadly it is essential that there is effective control of the risk of money laundering and other criminal activity.

As a regulator, these are the factors influencing our thinking and our approach to regulating this sector. It is our objective to ensure the regulatory environment enables the potential benefits of innovation for consumers, businesses and society to be realised, while ensuring that the risks are effectively managed and mitigated.

Consumer and investor protection begins with firms themselves. For the crypto sector to succeed, compliance and a customer centric approach should not be seen as a cost of doing business, but rather, they have the potential to be a competitive advantage.

The provision of financial services is about helping others make financial decisions; it is also about the provision of choice for consumers and importantly, the provision of products that are appropriate and suitable for consumers. And the better firms’ own risk management, the better position they are in to understand, calculate and mitigate their risks, therefore strengthening their business model, and their relationship with their customers.

MiCAR Readiness

As the National Competent Authority for MiCAR in Ireland, we are well advanced in our authorisations pathway having regard to the twelve-month transitional period for VASPs to be authorised as CASPs under MiCAR.

 The Central Bank’s authorisation process is based on clarity, transparency, flexibility and predictability for firms seeking authorisation.  We are committed to delivering the benefits of the new EU regulatory framework for crypto assets. And we have been in continuous engagement with different players in the ecosystem, including of course, with many of you in the room today.

To achieve this, we have a well-resourced and expert team handling the CASP authorisation process in a high quality and timely way. This is designed to ensure a good implementation of the new MiCAR regime in Ireland cognisant of business demands and the 12-month transition period.

Key to our approach is the idea of a path to success - for firms engaging with the Central Bank on MiCAR Authorisation, and for the regulatory system as we move to the implementation of this new framework.

Let me say a little about this. Sonia Weafer, who heads up the CASP Authorisation and Supervision teams, will delve into some of the aspects I mention in more detail in a few minutes.

Firstly, our authorisation approach. This is two-phased, with phase 1 comprising of preliminary engagement and a Key Facts Document (KFD) stage and phase 2 comprising of formal authorisation. In order to move as quickly as possible, with maximum flexibility and adaptive engagement for firms, we are heavily frontloading work into phase 1. This will set firms up well for an efficient phase 2 process.

We have designed this purposefully as we are extremely cognizant of the tight timelines of MiCAR and the 12 months transitional arrangements. By front-loading into the preliminary engagement and KFD, we are hopeful that we will unpack and resolve any issues, thus making the formal authorisation process smoother and more expeditious. We believe this approach will benefit firms as they engage with us during the authorisation process.

I have mentioned the path to success for firms and there are a few considerations that can ensure this.

We are dealing with a pipeline of diverse firms. Some are large global firms that have significant resources to hand, including the ability to leverage intra-group structures and entities. Others are smaller firms, perhaps indigenous, perhaps at an earlier stage in their business life cycle. Some are seeking authorisation for the full suite of activities under MiCAR, while some are seeking authorisation for a select few activities. It is a diverse context, and the issues we all are experiencing are diverse as we navigate this new regulation together.

In the context of this diversity, I would like to highlight that we recognise the challenges you will be facing. And we want you to succeed, so that we have well-prepared and well-run firms on the other side of the gate.

For those of you in the earlier stages of the business life cycle, we recognise that resourcing the lift on MiCAR is significant. Regulation should not be a barrier to innovation and we fully appreciate the need for proportionality in our approach. In this context, what we have found helpful is detailed engagement with you, and signposting from our side, partnered with your own reflections. MICAR is about enabling safe innovation, and I say to small firms here today, we will work with you to meet challenges in a constructive way.

If I were to call out specific issues I would like to focus on:

Substantive presence: We believe that MiCAR provides a constructive way forward to give legal clarity within a harmonised manner across the EU. We believe that building an EU crypto ecosystem demands commitment. As such, substance is of critical importance. I won’t focus on our lack of appetite for firms that seek to operate on a “brass plate” basis, rather I want to encourage firms to recognise the opportunity of investing appropriately in their EU entity seeking CASP Authorisation and the long term benefits to them of contributing to the development of the EU crypto ecosystem.

Outsourcing: Outsourcing is part of every modern business and we recognise its benefits. Leveraging intra-group entities and functions can bring additional strength as well as efficiencies. There are, of course, limits to the level of outsourcing that works. A firm cannot outsource to the extent that it becomes an empty shell or in a manner that means a core activity and the effective accountability for it are moved outside the firm.

Alignment with MiCAR and the ESMA Broker Model: A critical point of concern for us is that business models should align with MiCAR, including the ESMA Broker Model Opinion. We have and will continue to push strongly against business models that do not adhere to this, in line with our European counterparts.

Clarity on the activities for which you need authorisation: An issue we are finding commonplace is that firms are not clear on their full business model and the activities they need authorisation for. Here we have worked with firms to unpack elements of their proposals, bringing questions to the table to help drive clarity.

Governance and Safeguarding: Regardless of the services, the target customer base, or whether the business is retail focused or aimed at institutional clients, governance and safeguarding of client assets are critical considerations for the Central Bank.

Finally, we appreciate that MiCAR is new, and that we are all navigating new scenarios. In this regard, we recognise that we have a role in facilitating greater clarity, and I reiterate that we are fully open to constructive discussion with firms to work through challenges. For any firm considering seeking authorisation as a CASP, our website has information on our authorisation process, including the CASP application form and information on our expectations on authorisation.

Our Work in Europe

Now I want to mention an aspect that has been fundamental to our approach to MiCAR and its implementation. That is that it is a European framework designed to operate consistently across Europe. Fundamentally, many of its benefits derive from the fact that it is a regulatory framework designed for the large European market.

As I have said, at the Central Bank we have played a very active role at European level in the development and implementation of the new framework.

We continue to focus a significant part of our effort to work at an EU level. It is of critical importance that together we achieve a harmonised and convergent approach to implementing MiCAR across the EU.

Avoidance of divergent approaches or the potential for regulatory arbitrage is a key goal for us, the European Supervisory Authorities (ESAs), and other National Competent Authorities (NCAs). Without this, the MiCAR framework will be undermined and its benefits significantly reduced.

We are working as part of both the EBA and ESMA supervisory communities in this regard. ESMA is charged with driving a convergent approach to MiCAR implementation for CASPs and through its Digital Finance Standing Committee (DFSC) is facilitating an impactful and real-time sharing of authorisation experiences and approaches among NCAs.

This includes building convergence on whether firm proposals, business models, and their component parts are fully compliant with MiCAR and any ESMA opinions. We are finding this to be a very useful and valuable process. It draws on, and builds on, a similar approach that was adopted during the Brexit-related relocation process. It is delivering real results.

Furthermore, we are engaging with other NCA’s on a bilateral basis to unpack specific issues and challenges. This engagement not only allows us to engage with other experts across the EU but also help to drive a convergent approach to applying MiCAR.

We want to build a path for success so that we can help deliver positive outcomes for the ecosystem, and our EU engagement is critical for this. The result is that we do not expect to see divergent approaches across the different EU jurisdictions.

Conclusion

Before I hand over to Sonia, I want to reiterate the purpose for today. We hope that today will facilitate a conversation, to help you as industry participants, navigate the next steps to success in your MiCAR journey with us here in the Central Bank. We find such engagement very valuable and hope that you do also.

We want to see firms move successfully through the authorisation process.

We are committed to achieving the benefits of the new EU regulatory framework for crypto assets while ensuring the risks are well managed. To achieve this, firms should focus on good quality submissions, timely engagement with us, full alignment with MiCAR and ESMA Broker Model Opinion, an openness to reflect on feedback, and a clear commitment to their European and Irish presence.

Thank you for your attention and I shall now handover to Sonia Weafer.