When own funds fall below the threshold: what it costs to be wrong
When a crypto-asset service provider's own funds drop below the floor required by Regulation (EU) 2023/1114 (MiCA), the authorisation itself is exposed, not just the balance sheet. Getting the response wrong costs market access and time, and the cost grows with every day the gap stays undocumented. Speed and paperwork decide the outcome, not the size of the shortfall.
The rule behind the threshold
Own funds requirements for authorised crypto-asset service providers sit in Regulation (EU) 2023/1114 (MiCA), in force since 30 December 2024. The regulation ties the floor to the licence category the provider holds and to its own cost base. The exact figures are set by the regulation itself, not by this page, and they are recalculated as the provider's overheads change.
A provider that also transfers crypto-assets between wallets stays subject to Regulation (EU) 2023/1113 (TFR) at the same time. A capital shortfall under MiCA does not pause the separate information-transfer chain under TFR. Both obligations run in parallel, and a breach of one does not excuse a breach of the other.
What actually changes
Below the threshold, three things move at once. First, the provider's own reporting obligation to the competent authority starts running, usually as soon as the shortfall is identified internally. Second, the authority gains grounds to ask for a remediation plan, and can attach conditions to continued operation while that plan is reviewed. Third, counterparties who rely on the authorisation — custodians, payment partners, exchanges — treat the notice itself as a signal, independent of whether the gap is later closed.
| Trigger | Immediate effect | Who acts first |
|---|---|---|
| Own funds below floor, identified internally | Internal escalation and notification duty starts | Management body / compliance officer |
| Notification reaches the competent authority | Authority may request a remediation plan | Competent authority |
| Remediation plan submitted | Authority reviews and may impose conditions | Competent authority, with provider input |
| Plan rejected or shortfall persists | Restriction or suspension of the authorisation becomes possible | Competent authority |
The order in this table is not optional. Skipping the internal escalation step to go straight to a public remediation announcement is one of the more common and more expensive mistakes.
What to do, in order
- Confirm the calculation. The finance function recalculates own funds against the current cost base before anyone outside the company is told anything.
- Notify internally in writing. The compliance officer records the date the shortfall was identified, not the date it is reported onward.
- Notify the competent authority within the applicable deadline. Counsel or the compliance officer prepares the notification; management signs it.
- Draft a remediation plan with a realistic timeline. This is not a formality — the authority reads it as evidence of governance quality, not just arithmetic.
- Brief counterparties who are contractually entitled to know, and no one else. Over-disclosure to customers or partners who have no notice right creates a second, avoidable problem.
- Keep a single evidence file from day one — calculation, internal notice, authority correspondence, remediation plan. This file is what the authority reviews, and what any later dispute turns on.
Who decides, and how fast
The competent authority responsible for the provider's MiCA authorisation decides whether the shortfall is a temporary technical breach or grounds for restriction. It decides on the evidence in the file described above: the calculation, the date of internal identification, and the credibility of the remediation plan. A provider that notifies late, or notifies with an incomplete plan, gives the authority less to work with — and less room to avoid restrictive measures.
There is no fixed universal clock here that this page can state as a number; the applicable deadline depends on the specific notification obligation attached to the provider's licence category. What is fixed is the sequence: identification, internal notice, external notice, plan. Reversing that sequence is the single most frequent cause of an outcome worse than the shortfall itself.
If your situation differs
A capital shortfall rarely arrives alone. Three adjacent situations change what "getting it right" means.
If a customer treats the funding gap as grounds to open its own compliance review, that audit request runs on its own timeline and its own evidentiary standard — see When a customer demands an audit.
If, in the same period, a distributor in another market has already filed your mark locally, that dispute does not pause for a capital shortfall and needs its own response — see When a distributor registered your brand locally.
If a development partner uses the same window to claim joint ownership of code or model weights, that claim is decided on a separate record and is not weakened or strengthened by the own funds question — see When a development partner claims joint ownership: what it.
If the own funds gap traces back to a smart contract the issuer no longer fully controls, the two problems share a cause but not a remedy — see The issuer loses control of the contract tokenised rights.
What this page does not cover
This page does not calculate the exact own funds figure for a given licence category — that depends on the provider's specific authorisation and cost base, and belongs in a file review, not a general situation page. It does not cover a shortfall caused by fraud or misstatement, which raises separate questions the competent authority and, potentially, criminal law handle differently. It does not set out the notification deadline in days, because that figure depends on the licence category and is not the kind of number this page states without the underlying record.
Verified
Last checked against the sources below on the date this page was published. Primary sources: Regulation (EU) 2023/1114 (MiCA); Regulation (EU) 2023/1113 (TFR). Both are cited by their official short form, as published, without paraphrase.
Related reading
What it costs to be wrong in this situation looks at a different trigger inside the same authorisation — a key function holder's resignation — with the same cost logic: speed and documentation decide the outcome, not the event itself.
FAQ
What is the first step when own funds fall below the threshold?
Recalculate against the current cost base internally and record the date of identification in writing before any external notification goes out.
Which deadline is already running?
The internal notification duty starts on identification. The external notification deadline to the competent authority depends on the licence category and is confirmed against the specific authorisation on file, not assumed from a general figure.
Who decides, and on what evidence?
The competent authority responsible for the provider's MiCA authorisation decides, based on the calculation, the timing of internal notice, and the credibility of the remediation plan submitted.