Custody, segregation and insolvency: what MiCA does not guarantee

Leaving crypto-assets on an authorised exchange is not the same as a guaranteed bank deposit. Articles 70 and 75 of Regulation (EU) 2023/1114 write duties of safeguarding, segregation and liability. They do not write a public fund that pays clients if the provider cannot. This page reads those two articles. Which service letters exist is in the services guide. Own-account staking, which Article 70 also closes, is in staking under MiCA.

Article 70: safeguarding, and money that is not an EMT

Paragraph 1 requires a CASP that holds clients’ crypto-assets, or the means of access, to make adequate arrangements to safeguard clients’ ownership rights, especially in the event of the provider’s insolvency, and to prevent the use of those crypto-assets for its own account. Paragraph 2 extends the idea to client funds other than e-money tokens, where the business model requires holding them: safeguard ownership and prevent use for the provider’s own account. Paragraph 3 is specific about the money: by the end of the business day after receipt, the provider places those funds with a credit institution or a central bank, and takes the steps needed so that the account is separately identifiable from any account used to hold the provider’s own funds.

Paragraph 4 allows payment services related to the crypto-asset service only if the CASP itself, or the third party, is authorised to provide them under Directive (EU) 2015/2366. A euro balance inside the app is not, by being there, an authorised payment account. You read who the payment institution is, just as you read who the CASP is.

Article 75: the contract, segregation and liability

A firm providing letter a — custody and administration on behalf of clients — concludes an agreement that identifies the parties, describes the service and the custody policy, the means of communication and authentication, the security systems, the fees and the applicable law. It keeps a register of positions in each client’s name. The custody policy must minimise the risk of loss from fraud, cyber threats or negligence, and a summary is given to a client who asks. At least every three months, and when the client asks, there is a statement of position in electronic form, with balance, value and transfers in the period.

Paragraph 6 requires procedures to return the crypto-assets, or the means of access, as soon as possible. Paragraph 7 requires holdings for clients to be segregated from the provider’s own, the clients’ means of access to be identified as such and, on the distributed ledger, the clients’ crypto-assets to be held separately. The legal sentence is this: crypto-assets held in custody are legally segregated from the provider’s estate, in the clients’ interest and in accordance with applicable law, so that the provider’s creditors have no recourse to them, in particular in insolvency. They must also be operationally segregated. “In accordance with applicable law” matters: the regulation orders the outcome and points to the law that makes it effective. It does not, on its own, describe the Spanish insolvency procedure.

Paragraph 8 makes the provider liable for the loss of crypto-assets or of the means of access as a result of an incident attributable to it. Liability is capped at the market value of the crypto-asset that was lost, at the time the loss occurred. Incidents are not attributable where the provider shows they occurred independently of the service or of its operations, and the text gives as an example a problem inherent in the distributed ledger that the provider does not control. Paragraph 9 forbids relying, for this custody, on another provider that is not authorised under Article 59, and requires the client to be told if another CASP is used.

What those articles are not

• They are not a deposit-guarantee scheme or an investor-compensation scheme. The text does not create a body that pays a balance when the provider cannot.
• They do not cover market loss. A fall in price is not the incident in paragraph 8.
• They do not cover the key you have already moved to a wallet you control. From there the practical regime is self-custody and the Travel Rule.
• They do not turn a row without letter a into a custodian. If the cell does not carry a, Article 75 has not been notified for that firm. The check is in the checklist.
• They do not replace an orderly wind-down plan. Article 74 requires a firm that provides the services in Articles 75 to 79 to have a plan that supports winding down without undue economic harm to clients.

Reading letter a on a profile — from the home page or from alternatives — says the service is notified. It does not say the particular contract copies Article 75, or that a future incident will be compensated up to the cap. That is in the contract and, if it comes to it, before the authority and the courts. This page does not assess a named exchange.

Common questions