Article 70 Safekeeping of clients’ crypto-assets and funds

Summary What does Article 70 of the MiCA regulation say?

This article addresses how crypto-asset service providers must handle client assets and funds that come into their possession.

The core theme is client protection through segregation: providers must not use client crypto-assets or funds for their own purposes, and must put arrangements in place to protect client ownership rights, particularly in the event of the provider's insolvency.

The article also touches on the handling of payment services in connection with crypto-asset offerings, requiring either direct authorisation or use of an authorised third party.

Notably, the segregation requirements for client funds do not apply to providers that are already regulated as electronic money institutions, payment institutions, or credit institutions, as those entities are subject to equivalent obligations under their existing regulatory frameworks.

Important points:

Safeguard client assets and funds by ensuring adequate arrangements are in place to protect client ownership rights and prevent their use for the provider's own account.
Any client funds received (other than e-money tokens) must be deposited with a credit institution or central bank by the end of the following business day, held in a separately identifiable account.
The fund segregation requirements do not apply to crypto-asset service providers that are already authorised as electronic money institutions, payment institutions, or credit institutions.

Springlex's summary of the article, a reading aid, not a substitute for the legal text.

1. Crypto-asset service providers that hold crypto-assets belonging to clients or the means of access to such crypto-assets shall make adequate arrangements to safeguard the ownership rights of clients, especially in the event of the crypto-asset service provider’s insolvency, and to prevent the use of clients’ crypto-assets for their own account.
1. Where their business models or the crypto-asset services require holding clients’ funds other than e-money tokens, crypto-asset service providers shall have adequate arrangements in place to safeguard the ownership rights of clients and prevent the use of clients’ funds for their own account.
1. Crypto-asset service providers shall, by the end of the business day following the day on which clients’ funds other than e-money tokens were received, place those funds with a credit institution or a central bank.
2. Crypto-asset service providers shall take all necessary steps to ensure that clients’ funds other than e-money tokens held with a credit institution or a central bank are held in an account separately identifiable from any accounts used to hold funds belonging to the crypto-asset service providers.
1. Crypto-asset service providers may themselves, or through a third party, provide payment services related to the crypto-asset service they offer provided that the crypto-asset service provider itself, or the third party, is authorised to provide those services under Directive (EU) 2015/2366.
2. Where payment services are provided, crypto-asset service providers shall inform their clients of all of the following:
  1. the nature and terms and conditions of those services, including references to the applicable national law and to the rights of clients;
  2. whether those services are provided by them directly or by a third party.
1. Paragraphs 2 and 3 of this Article shall not apply to crypto-asset service providers that are electronic money institutions, payment institutions or credit institutions.

Relevant recitals

Recital 82 Safeguarding clients’ funds and payment accounts

In order to ensure protection of their clients, crypto-asset service providers should have adequate arrangements to safeguard the clients’ ownership rights with respect to the crypto-assets they hold. Where their business model requires them to hold funds as defined in Directive (EU) 2015/2366 in the form of banknotes, coins, scriptural money or electronic money belonging to their clients, crypto-asset service providers should place such funds with a credit institution or a central bank, where an account with the central bank is available. Crypto-asset service providers should be authorised to make payment transactions in connection with the crypto-asset services they offer only where they are authorised as payment institutions in accordance with that Directive.

Recital 83 Custody duties, segregation, and ICT liability

Depending on the services they provide and due to the specific risks raised by each type of services, crypto-asset service providers should be subject to requirements specific to those services. Crypto-asset service providers providing custody and administration of crypto-assets on behalf of clients should conclude an agreement with their clients with certain mandatory provisions and should establish and implement a custody policy, which should be made available to clients upon their request in an electronic format. Such agreement should specify, inter alia, the nature of the service provided, which could include the holding of crypto-assets belonging to clients or the means of access to such crypto-assets, in which case the client might keep control of the crypto-assets in custody. Alternatively, the crypto-assets or the means of access to them could be transferred to the full control of the crypto-asset service provider. Crypto-asset service providers that hold crypto-assets belonging to clients, or the means of access to such crypto-assets, should ensure that those crypto-assets are not used for their own account. The crypto-asset service providers should ensure that all crypto-assets held are always unencumbered. Those crypto-asset service providers should also be held liable for any losses resulting from an incident related to information and communication technology (‘ICT’), including an incident resulting from a cyber-attack, theft or any malfunctions. Hardware or software providers of non-custodial wallets should not fall within the scope of this Regulation.

Table of contents

Springlex and this text is meant purely as a documentation tool and has no legal effect. No liability is assumed for its content. The authentic version of this act is the one published in the Official Journal of the European Union.