Crypto-Asset Service Provider (CASP)

Crypto asset service providers, or CASPs, were first mentioned in 2020, when there was a draft for the MiCA regulation, which has now been finalized (since June 2023). The term in MiCA helped establish a unified legal framework for managing virtual assets and regulating the crypto market while enforcing new anti-money laundering (AML) and counter-terrorist financing (CTF) rules.

The key criteria for crypto-asset service providers under MiCA include the following activities:

• Executing orders for crypto assets on behalf of third parties.
• Receiving or transmitting crypto assets on behalf of third parties.
• Exchanging crypto assets for fiat currencies.
• Placing crypto assets. 
• Operating a trading platform for crypto assets.

Crypto-asset service providers are crypto businesses serving clients in the EU, including ICO issuers, custodian wallet providers, and similar services.

The main difference between CASPs and VASPs lies in their regional use and regulatory origin:

• CASP, or Crypto Asset Service Provider, is a term used within the EU under the MiCA regulation.
• VASP, or Virtual Asset Service Provider,  is used outside the EU, for example, in the US, and defined by the Financial Action Task Force or the FATF.

Since MiCA provides regulations for the crypto market in the EU, and if you’re based in the EU and offer MiCA-defined services, you should use the “CASP” term. However, if your business is outside the EU and aligns with international standards, use “VASP,” especially if you don’t offer services in Europe. That said, both terms can be used interchangeably. 

Crypto can be used to launder money, similar to how a standard bank can be used for the same purpose using tactics like smurfing. Anonymous crypto wallets make it difficult to trace transfers and identify suspicious transactions. For this reason, CASPs are required to implement proper due diligence processes, which means that offering or maintaining anonymous crypto wallets is not allowed. This rule aims to improve transaction transparency, minimizing the chances of illegal activities.

The KYC process, or Know Your Customer, is part of AML compliance and consists of three main steps:

1. Verifying the client’s identity with reliable information such as legal name, date of birth, and address, typically using documents like driver’s licenses or passports.
2. Assessing the risk of new clients or business relationships through more detailed background checks.
3. Regularly reviewing customer risk profiles and transactions for signs of criminal activity.