How to Comply with MiCA and DORA: A Detailed Guide for Executives

MiCA (Markets in Crypto-Assets Regulation) is a new set of rules from the European Union that is supposed make the crypto market safer and more reliable. It’s designed to protect people who invest in cryptocurrencies and that the crypto companies follow the rules.

MiCA applies to anyone issuing or trading cryptocurrencies, like exchanges and wallet providers. It ensures they operate transparently and protect users from fraud or hidden risks. This regulation also focuses on stablecoins, requiring issuers to have solid reserves to avoid collapses. Overall, MiCA aims to build trust in the crypto market while encouraging innovation.

DORA (Digital Operational Resilience Act) is about strengthening financial institutions against cyberattacks and IT problems. It ensures these businesses have the tools and processes to handle disruptions and keep running. DORA also sets strict rules for managing risks when working with third-party tech providers and requires companies to test their systems for vulnerabilities.

MiCA and DORA create a safer environment for digital finance in the EU, supporting innovation while ensuring stability and security. 

These regulations are critical for businesses operating in financial services and crypto markets.

High stakes for non-compliance: legal, financial, and reputational risks.

Role of compliance consultants in navigating these frameworks.

Understanding MiCA and DORA

What is MiCA?

• Applicability: Crypto-asset issuers, crypto service providers (CASPs), and stablecoin operators.
• Key objectives:
  • Ensuring consumer protection.
  • Regulating crypto-asset activities to reduce market volatility.
  • Licensing requirements for CASPs.
• Core areas:
  • Whitepaper obligations.
  • Anti-money laundering (AML) compliance.
  • Stablecoin reserves and risk management.

What is DORA?

• Applicability: Financial institutions, ICT providers, and entities involved in financial markets.
• Key objectives:
  • Strengthening digital resilience.
  • Mitigating risks from third-party ICT providers.
  • Standardizing operational resilience across the EU.
• Core areas:
  • ICT risk management frameworks.
  • Incident reporting.
  • Third-party risk management.

Why Both Matter

• Importance of simultaneous compliance for companies intersecting crypto and financial markets.
• The impact of evolving regulatory landscapes on operations, technology, and governance.

Points of Intersection

2.1 Overlapping Requirements

• Risk management:
  • MiCA’s focus on operational stability aligns with DORA’s ICT risk frameworks.
• Incident response:
  • MiCA mandates clear communication for crypto-related disruptions, echoing DORA’s standardized incident reporting.
• Third-party risk:
  • Both emphasize due diligence for service providers, particularly ICT and financial infrastructures.

Combined Benefits

• Unified compliance efforts streamline reporting and risk management.
• Strengthened resilience across both crypto and traditional financial domains.

Key Differences

Scope and Applicability

• MiCA: Crypto-assets and service providers.
• DORA: Broader financial institutions, with crypto as a subset.

Focus Areas

• MiCA: Consumer protection, market integrity, and innovation enablement.
• DORA: Operational resilience, cybersecurity, and third-party risks.

Compliance Frameworks

• MiCA: Licensing, whitepapers, and stablecoin reserves.
• DORA: Comprehensive ICT risk management and incident reporting.

Specific Use Cases

• MiCA governs token issuance and trading platforms.
• DORA applies to entities reliant on ICT providers and digital infrastructures.

Compliance Timelines

MiCA

• Final implementation deadline: End of 2024.
• Key milestones:
  • By mid-2024: Stablecoin compliance frameworks.
  • By late 2024: CASP licensing requirements enforced.

DORA

• Full compliance required by January 2025.
• Key milestones:
  • By late 2023: Establish ICT risk management policies.
  • By early 2024: Implement incident reporting and testing mechanisms.

Practical Steps to Achieve Compliance

Establish a Compliance Team

• Appoint a compliance officer to oversee both MiCA and DORA requirements.
• Engage external consultants for expertise in overlapping areas.

Perform Gap Analysis

• Assess current operations against MiCA and DORA requirements.
• Identify deficiencies in areas like ICT resilience, consumer protection, and reporting frameworks.

Build an Integrated Compliance Framework

• Develop policies that address both MiCA’s and DORA’s mandates:
  • Unified incident response plans.
  • Risk assessments covering both crypto and operational resilience.

Implement Technology Solutions

• Leverage GRC (Governance, Risk, and Compliance) tools to automate processes:
  • Incident tracking and reporting.
  • Risk assessments for ICT and crypto services.
• Adopt encryption and monitoring tools to align with DORA’s cybersecurity requirements.

Ongoing Monitoring and Training

• Train staff on MiCA and DORA compliance requirements.
• Continuously monitor for regulatory updates and adapt processes accordingly.

Benefits of Compliance

• Enhanced operational resilience and risk management.
• Improved trust among stakeholders, clients, and regulators.
• Competitive advantage in a highly regulated market.

How Consulting Can Help

• Role of compliance consultants:
  • Tailoring compliance roadmaps.
  • Providing technical expertise in ICT and crypto-asset risk management.
  • Simplifying regulatory complexities for executives.
• Benefits of engaging consultants:
  • Cost-efficiency through expertise.
  • Faster adaptation to evolving requirements.

While MiCA does not explicitly detail cybersecurity requirements, it mandates that crypto-asset service providers (CASPs) implement robust operational safeguards, which inherently encompass cybersecurity measures. Key obligations include:

• Operational Resilience: CASPs must ensure the continuity and regularity of their services by employing resilient systems and protocols. This involves implementing effective policies for managing operational risks, including those related to information and communication technology (ICT).

• Risk Management: Companies must establish comprehensive risk management frameworks that identify, assess, and mitigate risks, particularly those associated with ICT and cybersecurity threats.

• Incident Reporting: CASPs must promptly report significant security incidents to relevant authorities, facilitating timely responses to potential threats.

• Governance and Internal Controls: MiCA states that CASPs maintain sound governance structures with clear internal controls, ensuring accountability and effective oversight of cybersecurity practices.

• Third-Party Management: When outsourcing ICT services, CASPs should ensure that third-party providers adhere to equivalent security standards, maintaining the integrity and security of outsourced functions.

• Final thoughts on the necessity of aligning with MiCA and DORA.
• Call to action: Highlight how a proactive approach ensures compliance, resilience, and market competitiveness.