Position Paper – Clarifications Needed on Fund Segregation Requirements for DASPs

In a new position paper, ADAN examines the implications of the European regulation on crypto-asset markets (MiCA) for Digital Asset Service Providers (DASPs) regarding the segregation of funds. MiCA requires DASP to segregate and protect their clients’ assets. However, this ongoing segregation requirement poses operational challenges in practice, particularly during transactions where service or conversion fees involve a temporary commingling of funds.

While the requirement for strict segregation of client assets is important for protecting investors, it raises questions of feasibility for PSANs that regularly conduct small transactions or engage in portfolio management, trading, or staking activities, which do not allow for continuous, real-time strict segregation.

A recommendation tailored to the specific characteristics of the sector

To balance investor protection objectives with the technical constraints faced by PSANs, ADAN recommends adopting a pragmatic approach. Thus, we propose that PSANs be authorized to segregate client assets from their own assets within a minimum of five business days when the amounts in question are less than the firm’s equity capital. This flexibility would allow PSANs to meet their obligations without compromising their operational viability, while ensuring adequate investor protection.