The Importance of Good Governance for MiCA Firms

The Markets in Crypto-Assets Regulation (MiCA) represents a significant step forward in how Europe approaches the regulation of digital assets. For firms seeking authorisation - or already operating - under MiCA, the message from regulators is clear: good governance is not a box-ticking exercise. It is a foundational requirement, and one that competent authorities will scrutinise closely.

What Regulators Expect

MiCA sets out explicit expectations for the internal governance arrangements of authorised firms. Regulators expect to see a clearly defined organisational structure with transparent lines of responsibility, adequate internal controls, and robust risk management frameworks. These are not aspirational standards - they are minimum thresholds for authorisation. Competent authorities, including national regulators operating under EBA and ESMA guidance, will assess whether governance arrangements are proportionate to the nature, scale, and complexity of a firm's activities. A firm issuing asset-referenced tokens has materially different governance obligations to a crypto-asset service provider (CASP) offering custody or exchange services - but both must demonstrate that their governance frameworks are fit for purpose.

Why Good Governance Is Critical

The stakes of getting governance wrong under MiCA are high. Regulatory action, reputational damage, and in serious cases, suspension or withdrawal of authorisation are all live risks for firms that treat governance as an afterthought. More fundamentally, strong governance protects clients. It ensures that decisions are made with appropriate oversight, that conflicts of interest are identified and managed, and that the firm's risk appetite is set and monitored at the right level. For an industry that has historically struggled with trust, demonstrating genuine governance maturity is a competitive differentiator as much as a regulatory obligation. Regulators are also looking beyond formal structures. A governance framework that exists on paper but is not embedded in day-to-day operations will not satisfy a supervisory examination. Culture, accountability, and the tone set by senior management all feed into how a firm's governance is assessed in practice.

Senior Management Accountability

MiCA places direct obligations on the management body of authorised firms. Senior leaders must be of sufficient good repute and possess adequate knowledge, skills, and experience to perform their roles. Fitness and propriety assessments are a core part of the authorisation process, and ongoing obligations apply throughout the life of the licence. Members of the management body are expected to commit sufficient time to their functions, maintain independence of judgement where required, and collectively cover the competencies relevant to the firm's activities. Regulators will push back on management bodies that are too thin, lack relevant expertise, or appear to be fulfilling roles in name only.

Compliance and Risk Functions

Two functions sit at the heart of MiCA's governance expectations: compliance and risk management. A designated compliance function must be in place, staffed by individuals with the authority, resources, and independence to carry out their responsibilities effectively. The compliance function is responsible for monitoring adherence to MiCA's requirements, identifying regulatory risk, and reporting to senior management and the management body on an ongoing basis. The risk management function must be capable of identifying, assessing, and managing the full range of risks the firm faces - operational, financial, market, counterparty, and increasingly, technology and cyber risk. For firms operating at scale or handling client assets, segregation of the risk function from front-line business activities is an expectation rather than a suggestion. Both functions must have direct access to the management body and must be resourced in a manner that reflects the firm's risk profile. Outsourcing elements of these functions is permissible under MiCA but does not reduce the firm's accountability for outcomes.

Practical Implications for Firms

For firms navigating MiCA authorisation, governance readiness should be treated as a workstream in its own right. Key questions to address include:

• Is the management body constituted correctly, with documented fit and proper assessments in place?
• Are compliance and risk functions formally established, with clear mandates and reporting lines?
• Does the firm have documented policies and procedures that are actively maintained and embedded?
• Is there a clear framework for identifying and managing conflicts of interest?
• Are governance arrangements reviewed periodically and updated to reflect changes in the business? Regulators are not expecting perfection from day one, but they are expecting evidence that firms have thought seriously about these questions and have credible frameworks in place.

Conclusion

MiCA has raised the bar for governance across the digital asset sector. For firms that get it right, strong governance is not just a compliance requirement - it is the foundation on which a durable, trusted business is built. For those that treat it as a secondary concern, the regulatory and commercial consequences are likely to be significant. If you are working through your MiCA authorisation or reviewing your existing governance arrangements, the time to act is now. The expectations are clear, and competent authorities have both the tools and the mandate to enforce them.