Learn about the upcoming cryptocurrency regulations in the Czech Republic under MiCA 2024, including key changes for CASPs/VASPs and compliance requirements.
Since 2021, the Czech Republic has introduced a new trade category under the Trade Licensing Act to regulate services related to virtual assets. Known as branch No. 81, “Provision of Services Related to Virtual Assets,” this addition reflects the growing need for oversight in the digital currency market. This change also forms part of amendments to the country’s Anti-Money Laundering (AML) legislation. According to the law, virtual assets refer to digital units that serve at least one of the following functions: payment, exchange, or investment. As a result, businesses engaged in buying, selling, managing, or transferring cryptocurrencies for profit must register trade No. 81 with the appropriate licensing office.
Cryptocurrency mining is another area requiring regulation. For mining activities that involve verifying cryptocurrency transactions using specialized hardware, businesses must additionally register under trade No. 56. This category covers software services, IT consulting, data processing, and web hosting, ensuring that all relevant activities fall under proper regulatory oversight.
Anti-Money Laundering (AML) Compliance
The Czech Republic has long-established rules aimed at preventing money laundering and terrorist financing, following European Union AML directives. These regulations also apply to those providing virtual asset services. Businesses must not only identify their clients but also retain customer data and develop internal procedures, including Know Your Customer (KYC) protocols. The Financial Analysis Authority (FAU) oversees compliance, and failure to maintain proper documentation can result in significant legal issues.
Related: Binance's Adoption of MiCA: Pioneering the Future of Crypto Regulation in Europe
Ongoing Legislative Development
The legal framework for cryptocurrencies is continuously evolving. Like other EU member states, the Czech Republic is preparing for the implementation of the Markets in Crypto-Assets (MiCA) regulation, which will introduce substantial changes in the cryptocurrency landscape. With many laws still under discussion, it’s difficult to predict all the new obligations businesses may face in the near future.
From a legal standpoint, the growing acceptance of cryptocurrencies in the Czech Republic could impact the way contracts are created and enforced. As digital currencies are considered property, their use in transactions may influence contract validity, especially given that the Czech legal system relies heavily on clear agreements between parties.
Furthermore, the increasing adoption of cryptocurrencies could disrupt traditional banking models, as more individuals may choose to store assets digitally rather than in bank accounts. This shift could push banks to offer cryptocurrency-related services to remain competitive, while also paving the way for decentralized finance (DeFi) platforms built on blockchain technology.
New Regulations on the Horizon: MiCA and DORA
The Czech Republic is aligning its crypto-asset regulations with the EU’s MiCA and the Digital Operational Resilience Act (DORA). These laws aim to create a transparent and secure environment for digital assets. However, additional local laws will be introduced to ensure that the Czech framework complements these EU regulations.
Related: Lithuania’s Evolving Crypto Regulatory Framework Under MiCA: Key Insights for Businesses
Pending legislation includes the Financial Market Digitalization Act, which will serve as the primary law for the implementation of MiCA and DORA. Other draft laws, such as the Amendment Act and the Czech National Bank’s Decree on crypto markets, will further refine the regulatory framework.
Key Updates and Requirements for CASPs/VASPs
Issuers of Crypto-Assets:
- Issuers will need to register with the Czech National Bank (CNB) and follow strict rules on transparency and disclosure.
- Compliance with market abuse regulations, consumer protection, and AML policies will be required.
Crypto-Asset Service Providers (CASPs):
- CASPs will need to secure a license from the CNB, adhering to stringent capital requirements and risk management guidelines.
- They will be held accountable for protecting consumers and ensuring operational integrity.
Market Integrity and Consumer Protection:
- The CNB will oversee crypto markets to prevent manipulation and maintain orderly trading.
- Investors will benefit from protections such as transparency in service offerings and educational resources.
Operational Resilience:
- CASPs will be required to implement cybersecurity measures and business continuity planning to safeguard their IT systems.
Implementation Timeline
The Czech Republic’s Digital Finance Act, which aligns with MiCA, is expected to be introduced in phases starting in 2024. DORA, similarly, will be rolled out with specific provisions to strengthen the operational resilience of cryptocurrency service providers. The full adoption of these regulations may extend into 2025, depending on ongoing legislative developments.
Licensing and Compliance Process
To operate legally in the Czech Republic, cryptocurrency businesses must meet several requirements, including company registration, AML/KYC compliance, and the appointment of a Money Laundering Reporting Officer (MLRO). CASPs will also need to undergo a comprehensive application process with the CNB, which will involve an in-depth review of their business model, financial stability, and risk management practices.
