This article explores the transition to the EU’s new MiCA regulation in Luxembourg, one of Europe’s banking hubs, where financial institutions benefit from a more comprehensive digital asset regulatory regime to accelerate sector growth.
Luxembourg’s Pre-MiCA Crypto Landscape: From AML Compliance to Market Growth
Luxembourg had not implemented any specific laws or frameworks covering crypto-assets prior to the introduction of MiCA in 2024. Similarly to many other EU countries, the provisions of the Fifth Anti-money Laundering Directive had been extended to cover CASPs. According to guidance released in 2018 by the Commission de Surveillance du Secteur Financier (CSSF), the country’s financial regulator, providers are required to register with the CSSF for AML/CFT purposes and comply with the relevant AML/CFT requirements.
Even without comprehensive legislation, Luxembourg has taken steps to advance the development of the digital asset sector and related technologies. In 2018, the CSSF granted a payment institution license to the Japanese exchange bitFlyer, supporting regulated intercontinental trading. In 2019, the country introduced laws conferring legal status to tokenized assets equivalent to that of traditional securities.
MiCA Implementation Timeline: Key Procedures and Deadlines for Crypto Businesses
As an EU regulation, MiCA is superimposed automatically into the domestic law of each member state from its effective date. However, the regulation requires that each member state appoint a domestic regulator for the supervision of MiCA.
In May 2024, the government of Luxembourg passed a draft law bestowing the CSSF with the necessary authority to supervise MiCA, and defined an 18-month transitional period under which previously licensed CASPs can benefit from grandfathering arrangements. This is the maximum permissible duration under MiCA, allowing CASPs until 1st July 2026 to obtain their MiCA license.
MiCA Notification Procedure: Simplified Licensing for Established Financial Institutions
Established financial institutions operating under the supervision of ESMA may be exempted from the requirement to obtain a full CASP license, per Article 60 of MiCA. The rules state that regulated credit institutions, securities depositories, investment firms, and others already licensed or regulated under established EU financial regulations may use a simplified notification procedure that allows them to extend existing operations to digital assets rather than undergo the licensing process.
Qualifying entities must notify CSSF at least 40 days in advance of commencing CASP operations. Regardless of whether the entity is exercising the Article 60 notification procedure or applying for a full CASP license, it is required to make preliminary contact with CSSF via their usual point of contact to initiate proceedings.
Full MiCA Licensing for New Crypto-Asset Service Providers (CASPs)
CASPs that do not qualify for an Article 60 exemption are required to apply for a license from the CSSF. On 6th February 2025, the CSSF issued guidance for CASPs seeking to initiate the licensing procedure. Applicants are required to attend an initial meeting, at which they must present documentation including a business plan, detailed information about the types of services to be provided, including accounts and wallets, and profiles of the individuals and entities involved in the business model, including their role and contractual relationship.
Following the initial meeting, the applicant is invited to submit a formal file to the CSSF containing all the necessary information and documentation to demonstrate MiCA compliance. There is no defined timeline for the application process; however, at the EU level, ESMA allows for a minimum of 70 days, which may be prolonged if the regulator determines that more information is required.
Transitional Arrangements for Existing CASPs: What Crypto Businesses Need to Know
The CSSF has specified a transitional period of 18 months until 30th June 2026, which is the longest possible period allowable under the MiCA rules. Until this date, CASPs that were previously licensed in Luxembourg can continue to operate under the terms of their existing registration.
All CASPs, regardless of their existing registration status, must undergo a full licensing application to obtain the MiCA license – there is no fast-track route for previously registered CASPs.
Even with a longer transition period in place, the portability benefits of the EU MiCA license make it desirable for CASPs to aim for an early resolution to their licensing application. Entities with their MiCA license can offer their services to all individuals and institutions throughout all 27 EU member states without restrictions.
Market Opportunity: Why Luxembourg is a Strategic Hub for Crypto Expansion in the EU
While Luxembourg itself represents a small retail market by comparison to other EU member states, as a European financial hub, it holds particular value for CASPs looking to gain a foothold in the European markets. The country is home to 119 banks from 24 different countries, with representation from across the EU, as well as non-EU locations such as the US, Canada, Switzerland, Latin America, and Asia.
Under the pre-MiCA CSSF registration regime, there are currently fourteen registered CASPs in Luxembourg. This includes crypto-native firms such as Bitstamp and bitFlyer, as well as traditional and neo-banks like Standard Chartered, Swissquote, and Sygnum. The caliber of existing market players indicates substantial interest in leveraging the country’s expertise in cross-border financial services, private banking, and wealth management as an entry point for the European digital asset markets.
Launching a MiCA-Compliant Crypto Offering with Wyden
Wyden Infinity covers the entire end-to-end trade lifecycle of digital assets across all pre-trade, trade and post-trade use cases. It enables sell-side firms to build and maintain retail and institutional client offerings as well as internal prop-trading needs via a single platform, making Wyden Infinity the ideal choice for banks and brokers when building and scaling their fully MiCA-compliant digital asset businesses.
A key advantage of the Wyden platform is that it offers true best execution through market-wide connectivity to over 55 trading venues and a smart order routing system that carries out price comparisons and order splitting to achieve the optimal execution terms. Transparency is built into the system via real-time pre-and post-trade data, and Wyden’s standalone accounting system offers a fully auditable transaction trail.
Integration with custody partners, such as Copper, Metaco, and Fireblocks, also means Wyden maintains an auditable record of transaction flows between custody and trading with automated liquidity management solutions that ensure an uninterrupted trading experience. Core banking integrations ensure smooth reconciliation and support the assimilation of a new digital asset offering into established workflows.
Contact us today for an initial discussion about implementing a compliant digital asset offering in your organization.
Please note that the above article does not constitute legal advice.