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By 1 July 2026, the European crypto market will reach a point of no return. On that date, the MiCAR transitional period expires across the EU, bringing an end to the regulatory grey zone in which many crypto‑asset service providers have operated for years. Any firm offering crypto‑asset services to EU clients without a MiCAR license after that deadline will be acting unlawfully and will be expected to stop.
Supervisory expectations
1) If your firm will not be authorized by 1 July 2026, prepare the orderly wind-down
ESMA expects unauthorized CASPs to have operational, credible, immediately executable wind‑down plans, designed to protect clients and avoid undue economic harm. That means, inter alia:
- Client offboarding must be organized (e.g., transfer client crypto-assets to an authorized CASP or to a self-hosted wallet)
- Advance notice to clients before executing the wind-down
- Plans must comply with conduct, prudential and AML/CFT obligations
2) If your firm will be authorized, client migration must be proactively managed
ESMA expects authorized CASPs to actively manage migration of clients ahead of the deadline. This includes onboarding EU clients before the transitional period ends and applying robust onboarding and AML/CFT processes.
3) Reminder about outsourcing and delegation
A key ESMA message is that firms must ensure outsourcing and delegation do not result in services being provided to EU clients via unauthorized third-country entities. Many operating models rely on group hubs, technology stacks, wallet infrastructure, customer support, and execution venues outside the EU. Under MiCAR, supervisors will look through contractual structures and assess whether the regulated service is effectively performed by an unauthorized entity, which can trigger enforcement, forced remediation, or a requirement to cease servicing EU clients.
CSSF expectations for IFMs with crypto exposure
Luxembourg IFMs managing AIFs with meaningful crypto exposure face specific CSSF expectations. If an IFM intends to manage an AIF investing >10% of NAV in crypto-assets, the IFM must obtain prior CSSF authorization for the strategy “Other‑Other Fund‑Crypto-assets” (and the initiator is expected to present the project to the CSSF beforehand). IFMs should also analyze whether their performed services map to activities listed in Article 60(5) of MiCAR. For indirect exposure via target funds (TFs), the CSSF does not require the “Other-Other Fund-Crypto-assets” license, but still expects robust risk assessments.
Read also our article Luxembourg funds and crypto-assets: understanding the CSSF’s latest clarifications
Key recommendations to firms
- Lock in a board‑level MiCAR decision now, clearly committing either to authorization or to an orderly exit well before the July 2026 deadline
- Manage client migration combining robust onboarding and AML/CFT refresh avoiding compressed timelines and last‑minute execution risks
- Embed orderly wind‑down as a standing capability, ensuring client assets, communications and compliance can be managed without disruption if authorization is not achieved
- Reassess outsourcing and delegation through a substance lens, ensuring no EU‑facing crypto services are effectively delivered by unauthorized third‑country entities
- Strengthen crypto governance and early supervisory engagement, particularly for IFMs, with clear control over keys, risks and MiCAR‑relevant activities
How EY can help
In Luxembourg, we are proud to have among our clients some of the most important players in the digital commerce industry. We provide support on a range of topics, spanning our assurance, consulting and tax service lines. Some of our services include the following:
- Assurance
- External assurance for Virtual Asset Service Providers (VASPs) / Crypto-Asset Service Providers (CASPs)
- Internal audit “as-a-service” for VASPs/CASPs
- Consulting
- Strategy definition and product development (e.g., tokenization, development of ARTs)
- CASP licensing and MiCAR regulatory compliance
- Preparation and/or review of white papers
- MiCAR top-up and gap analysis
- Cybersecurity, DORA and outsourcing assessments
- Compliance/crypto-related training to staff members
- Tax/Legal
- Tax reporting including CARF gap analysis and implementation
- VAT support
- Support in the corporate setup of Luxembourg VASPs/CASPs
- Transfer pricing support and documentation
Summary
By 1 July 2026, the European crypto market will reach a point of no return. On that date, the MiCAR transitional period expires across the EU, bringing an end to the regulatory grey zone in which many crypto‑asset service providers have operated for years.
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