ESMA says crypto firms must protect client funds under the EU’s MiCA rules by placing them with qualifying institutions. An account held by a non-bank payment provider does not automatically meet the safeguarding requirement, the regulator said.
What MiCA requires for client money
Article 70 of MiCA distinguishes customer crypto-assets from client money. For covered client funds other than e-money tokens, a crypto-asset service provider must deposit the money with a credit institution or central bank by the end of the following business day. The account must be identifiable separately from the provider’s own money. These requirements aim to reduce exposure if the provider encounters financial problems. The full wording is available in ESMA’s MiCA rulebook.
Article 70 also specifies exemptions for certain credit institutions, payment institutions and electronic money institutions. The legal status of each firm therefore matters: holding a payment-services authorisation is not by itself proof that every crypto business arrangement meets the relevant rules.
Under MiCA Article 70, providers must protect clients’ rights over covered funds and crypto-assets. ESMA says funds received through a payment intermediary must be placed with a credit institution or central bank by the end of the next business day.
The clarification does not ban every use of a non-bank payment provider. It distinguishes temporary receipt of funds from the subsequent safeguarding arrangement required by MiCA. The legal account holder matters because it can affect who has a claim to funds if an intermediary fails.
Where crypto firms need to check their arrangements
Crypto firms should review account ownership, contracts, payment flows and transfer timing against the regulation and ESMA’s interpretation. These requirements do not eliminate all counterparty or insolvency risks. Related EU policy debate includes French proposals on MiCA and DeFi safeguards.
Primary source
ESMA Q&A on safeguarding client funds.
Related Reading
Related coverage includes the Central Bank of Ireland’s safeguarding fine against Coinbase Ireland and our report on the SEC’s proposed crypto custody framework.
This report summarises regulatory guidance and is not legal advice.
