The European Securities and Markets Authority (ESMA) published today a new Q&A setincluding one concerning the treatment of betting services under the MiCA.
The European Commission explains that the MiCA does not contain specific provisions on betting. Therefore, it does not prohibit betting, and betting as such is not subject to specific requirements or licensing.
Unlike staking, where crypto asset holders directly engage on a proprietary basis with the distributed ledger protocol to stake their assets to gain validator privileges and ultimately collect the associated block rewards, or where they pledge their assets to a pool of liquidity in return Staking services (also referred to as staking-as-a#service) are provided to clients for a fee by intermediaries who undertake to stake clients’ crypto assets on their behalf. The staking service provider will collect the return or gain the validation privileges that allow them to earn block rewards.
This performance or these block rewards are then distributed between the service provider in return for their service (staking the assets on behalf of the client, performing validation obligations and collecting the block rewards, etc.) and the provider’s clients staking services, which are the ultimate owners of the crypto assets being staking.
When providing betting services, the cryptographic assets or the private keys that provide access to them are kept by the betting service provider. Thus, the provision of betting services is ancillary to the custodial services which are fully covered by MiCA. Therefore, the provision of staking services requires that the crypto asset staking service provider is authorized under the MiCA to provide safekeeping and management of crypto assets on behalf of clients as defined in Article 75 MiCA.
When offering and providing the staking services, the service provider must at all times comply with the requirements set out in the MiCA for entities authorized to provide safekeeping and management of 6 crypto assets on behalf of clients (in particular articles 59, 62 , 66, 67, 68, 69, 70, 71, 72, 73,74 and 75 MiCA including but not limited to entering into agreements that define duties and responsibilities, separation of customer assets from the property of the service provider, minimizing the risk of loss, liability for loss of crypto assets, etc.).
In particular, it follows from these obligations that when staking services are provided in conjunction with the provision of custody, cryptocurrency service providers (CASPs) should ensure that assets held on behalf of clients can be returned to clients in accordance with the agreement custody.
CASPs should also remain liable to their clients for any loss of crypto assets attributed to them, in accordance with section 75(8) of MiCA. Losses of crypto assets arising from the provision of staking services provided to the customer and from the underlying staking activity itself, should be considered attributable to CASP.
When staking services are provided in conjunction with any other cryptocurrency services governed by MiCA, CASPs should obtain express consent from customers to stake their crypto assets, as it may impact their customers’ ability to access.