For the past two years, the European crypto industry has been focused on a single objective: obtaining authorisation under the Markets in Crypto-Assets Regulation (MiCA).
Now that many Crypto-Asset Service Providers (CASPs) have completed the authorisation process, a new challenge has emerged: maintaining ongoing compliance.
One of the most frequently overlooked areas is insurance.
Many firms assume that purchasing Professional Indemnity Insurance to satisfy regulatory requirements is sufficient. In reality, MiCA compliance is an ongoing obligation, and a CASP’s insurance programme should evolve as the business grows, expands into new services, enters new jurisdictions, or increases assets under custody.
The question is no longer, “How do we obtain our MiCA licence?”
The question is, “Does our insurance programme still reflect the business we operate today?”
From MiCA Authorisation to Ongoing Compliance
Obtaining a MiCA licence demonstrates that a CASP has satisfied its regulator that appropriate governance, systems, controls and capital requirements are in place.
However, businesses rarely remain static after authorisation.
Transaction volumes increase. New products are launched. Additional crypto-asset services are introduced. Customers are onboarded from new jurisdictions. Third-party technology providers change. New operational and cyber risks emerge.
A CASP’s insurance programme should evolve alongside those changes.
Under Article 67 of MiCA, CASPs must maintain prudential safeguards equal to the higher of the applicable permanent minimum capital requirement or one-quarter of the previous year’s fixed overheads.
Those safeguards may be maintained through own funds, Professional Indemnity Insurance, or a combination of both.
For growing businesses, this means that insurance requirements can change significantly from one year to the next.
Professional Indemnity Insurance Is Only One Part of MiCA Compliance
Meeting the minimum MiCA insurance requirement is only one part of the equation.
A well-designed CASP insurance programme should reflect the actual services being provided.
Professional Indemnity Insurance protects against claims arising from errors, omissions, or failures in professional services. However, many CASPs are also exposed to risks that fall outside the scope of a traditional PI policy.
Depending on the business model, additional cover may include: Professional Indemnity, Cyber, Crime, D&O and Digital Asset Custody Insurance.
Growth Changes a CASP’s Risk Profile
Growth is particularly important within the crypto sector because rapid expansion can materially alter a company’s risk profile.
The Next Phase of MiCA
Insurance has an important role to play in that process, not simply as a regulatory requirement, but as a mechanism for protecting a company’s balance sheet, directors, operations and customers.
At Elmore, we work with CASPs across Europe to structure MiCA-compliant insurance programmes covering Professional Indemnity, Cyber, Crime, Directors & Officers and digital asset custody risks.