When the applicant is asked to prove substance: what to do first
The regulator has doubts about your presence in the jurisdiction, not about your business model. Answer with evidence of staff, premises and control, not with a legal argument. Reply within the deadline stated in the request letter, and prepare the file for a possible follow-up review.
Basis
Authorisation under Regulation (EU) 2023/1114 (MiCA) requires an applicant to show an effective and stable presence in the authorising member state, not a registered address alone. The same file often has to demonstrate operational readiness under Regulation (EU) 2023/1113 (TFR), because a crypto-asset service provider must run the infrastructure the travel rule requires before authorisation is granted.
Practical consequence
A substance request pauses the authorisation clock in most national procedures, but it does not reset it to zero. Missing the reply deadline commonly triggers a refusal on the file as submitted, not a silent extension. The applicant then has to reapply, and the second file is read against the first one.
What to do first
Order matters more than volume. A file with five weak proofs beats a file with one thick binder and no structure.
| Area | What the regulator checks | Typical proof |
|---|---|---|
| Staff | Who is physically present and takes decisions | Employment contracts, local addresses, an organisation chart |
| Premises | Whether the office is functional, not a mailbox | Lease, utility bills, site photographs |
| Governance | Where board decisions are actually taken | Minutes, meeting locations, attendance records |
| Systems | Whether the technical setup is operated locally or outsourced without oversight | Vendor contracts, access logs, incident procedures |
- Read the request letter line by line and list every point raised, in the regulator's own wording.
- Assign each point to one named person inside the company who owns the evidence.
- Collect documents dated before the request, not documents created for the reply.
- Draft a short cover memo that maps each document to the point it answers.
- Have counsel review the memo against the request before submission.
- Submit through the same channel the request arrived on, and keep proof of submission.
If part of the technical evidence rests on a data set your team did not build in-house, check its origin before you submit it. See When a data set is bought without provenance for what to verify before a document enters a regulatory file.
Who decides
The national competent authority that received the application decides on the sufficiency of substance, not a court and not an industry body. It may ask for a meeting, a site visit, or written clarification before it rules. The file stays open until the authority confirms it is complete.
Branches
If the request follows a recent corporate restructuring, the regulator often wants to see that governance did not become hollow in the process. If your entity went through a demerger, see When a portfolio must be split in a demerger for how to keep the split legally clean before evidence goes into an authorisation file.
If the substance question touches technology you licensed or built externally, check first whether ownership actually moved with the build. See The deliverable was accepted but never transferred ownership of for how to close that gap before it reaches the regulator.
If the file relies on tokenised rights and part of the record sits off-chain, a mismatch between the agreement and the metadata will surface during review. See An off-chain agreement contradicts metadata tokenised rights for what to reconcile before submission.
Limit
This page does not replace the wording of the request letter itself, and it does not predict how a specific authority will weigh a given proof. It does not cover what happens after a refusal — that path depends on the national procedure applicable to the file.
Verified
Checked against Regulation (EU) 2023/1114 (MiCA) and Regulation (EU) 2023/1113 (TFR) as published on the official EU legislation portal. Reviewed on the date shown in the site footer.
Related publications
A related situation from the same practice: A promotion is treated as an offer authorisation.
If your file has reached this stage, a short call before the reply is due usually saves a redraft later.
FAQ
What is the first step when the applicant is asked to prove substance?
List every point raised in the request letter and assign each one to a named person who holds the evidence. Do this before drafting a single line of the reply.
Which deadline is already running?
The deadline stated in the request letter itself; national procedures do not usually grant a second one automatically. Missing it is commonly read as an incomplete application, not as a pending file.
Who decides, and on what evidence?
The national competent authority handling the application decides, based on the documents submitted and any site visit or meeting it requests. It does not decide on argument alone.