The EU Regulation on Markets in Crypto-Assets (MiCA) has been in full effect since December 2024, marking a significant milestone in the regulation of crypto-assets in the European Union. This regulatory framework has increased the credibility of crypto-assets and boosted confidence in crypto-asset markets.
Crypto-assets and the insurance industry
The crypto industry, once largely untapped by insurers due to regulatory uncertainty, has seen increased interest from traditional insurers along with new crypto focused insurers. And now that MiCA is implemented, we have the necessary regulatory oversight and market stability to encourage these insurers to enter the crypto space.
Article 67 of MiCA – prudential safeguards for CASPs
Crypto-asset service providers (CASPs) must comply with Article 67, which requires adequate financial resources to cover risks associated with their activities. This can be achieved through either:
- A reserve of own funds; or
- An insurance policy
A MiCA compliant insurance policy should cover the EU territories where the services are provided, be disclosed to the public and include coverage of the following risks:
- Loss of documents
- Misrepresentations or misleading statements
- Acts, errors or omissions resulting in breach of:
a. Legal and regulatory obligations
b. The obligation to act honestly, fairly and professionally towards clients
c. Obligations of confidentiality
d. Failure to establish, implement and maintain appropriate procedures to prevent conflicts of interest - Losses arising from business disruption or system failure
- Gross negligence in safeguarding clients’ crypto-assets and funds, where applicable
- Liability of CASPs providing custody and administration of crypto-assets for clients, pursuant to the loss of any crypto-assets or the means of access to the crypto-assets as a result of an incident attributable to the CASPs.
Finally, MiCA insurance must have an initial term of not less than one year, have a cancellation notice period of at least 90 days and be provided by a third-party.
Recent developments
Since MiCA’s full implementation, crypto-asset insurance products and services availability have increased. Insurers are developing policies that specifically address challenges in the crypto market and playing a stronger advisory role in mitigating portfolio risks for businesses and individuals.
Recent press reports have highlighted the growing importance of insurance in the crypto space. For instance, a report from the European Insurance and Occupational Pensions Authority (EIOPA) in late 2024 emphasised the need for insurers to develop specialised expertise in crypto-asset risks to meet the growing demand for coverage under MiCA regulations.
Additionally, several major European insurers have announced new crypto-asset insurance products tailored to meet MiCA requirements. These products are designed to provide comprehensive coverage for CASPs, addressing the specific risks outlined in Article 67.
Elmore and MiCA
The relationship between the insurance industry and the crypto space continues to evolve. As MiCA regulations are now fully in force, it is crucial for all players in the crypto space to ensure compliance and for insurers to adapt their offerings to meet the new regulatory requirements.
Elmore, as an insurance broker serving the tech sector, remains committed to working with clients, partners, and local governing bodies to provide tailor-made policies, products, and services that reflect this new regulatory environment.