MiCA location rules for the Czech Republic

The Markets in Crypto-Assets Regulation (“MiCA”) and the European Securities and Markets Authority (“ESMA”) guidelines impose strict location requirements on crypto asset service providers (“CASPs”) operating within the European Union. These rules are designed to establish strong governance, ensure local accountability, and maintain effective regulatory supervision. For CASPs operating in the Czech Republic, understanding these requirements is crucial to securing authorization and maintaining compliance.

One of the primary requirements under MiCA is the physical presence of executive management. At least one member of the executive team must reside in the Czech Republic. This ensures that decision-makers remain accessible to regulators and actively engaged in the company’s operations.

The CEO must be fully dedicated to managing the CASP and is not permitted to run another business simultaneously. This restriction guarantees that the CEO can focus entirely on the oversight and decision-making processes essential to the company’s compliance with regulatory expectations.

Beyond physical presence, MiCA requires board members to possess a deep understanding of both Czech and EU financial regulations. Their expertise must include Czech compliance laws, the broader EU regulatory framework, and a practical grasp of MiCA’s implications for CASPs. This ensures that board members are equipped to make informed decisions and maintain regulatory compliance.

Key decision-making roles, including compliance, risk management, and IT security oversight, must be managed within the Czech Republic. These functions cannot be outsourced outside the EU, as regulators require direct oversight to ensure operational integrity. While support functions such as payroll and IT support may be outsourced, strategic decision-making must remain in the home country.

MiCA allows exemptions for small EU Member States with fewer than one million inhabitants, permitting executives to reside in a neighboring country as long as they can attend in-person engagements within two business days. However, this exemption does not apply to the Czech Republic. All key executives of CASPs must be physically based in the country.

MiCA allows exemptions for small EU Member States with fewer than one million inhabitants, permitting executives to reside in a neighboring country as long as they can attend in-person engagements within two business days. However, this exemption does not apply to the Czech Republic. All key executives of CASPs must be physically based in the country.

Failure to comply with MiCA’s location requirements can have serious consequences for CASPs. Companies that do not meet these obligations risk regulatory rejection, preventing them from obtaining the necessary authorization to operate. Additionally, non-compliance may lead to heightened regulatory scrutiny, resulting in increased oversight and frequent compliance audits. In severe cases, violations may incur financial penalties or even lead to the revocation of a CASP’s operating license.

To operate legally and effectively under MiCA, CASPs must adhere to strict location requirements.

At least one key executive must reside in the Czech Republic, and all strategic decision-making functions must be based within the EU. Additionally, the CEO must be fully dedicated to managing the CASP. Regulatory communication must be conducted in Czech, and local decision-makers must be readily accessible to authorities. Regulatory communication must be conducted in Czech, and local decision-makers must be easily accessible to authorities.

By meeting these requirements, CASPs can ensure regulatory compliance, maintain operational integrity, and secure the necessary authorization to continue their business activities.