Kvarn Capital says the partner model with Sweden's Goobit, announced on Monday, is neither an agency arrangement nor outsourcing under MiCA. No regulated function is delegated, says co-founder and chief investment officer Joonas Järvinen.
Photo: Joonas Järvinen is co-founder and chief investment officer at Kvarn, which launched the Kvarn X Embedded partner product alongside the Goobit arrangement.
Goobit launched its Futureproof savings platform on Monday evening, with the services requiring authorisation provided by Finland's Kvarn Capital under its own MiCA authorisation. Goobit was itself refused a licence in Sweden on 2 July and has appealed. Kaupr put a series of questions to Kvarn about how the arrangement is structured. Joonas Järvinen, co-founder and chief investment officer at Kvarn, says it is neither an agency arrangement nor outsourcing.
Järvinen points to a Q&A answer from the European Commission on agents under MiCA, published on ESMA's site, and to Article 73 on outsourcing. His starting point is that the regulated service remains entirely with Kvarn Capital.
"We do not view the Embedded model as an agency arrangement under ESMA Q&A 2143, nor do we consider outsourcing under Article 73 to be engaged."
"The key point is that the regulated service remains entirely with Kvarn Capital. Customers contract directly with Kvarn, Kvarn is the identified CASP, and Kvarn retains the regulated customer relationship and responsibility for all applicable MiCA obligations."
On Article 73, he says the provision concerns the outsourcing of operational functions relating to services or activities, whereas no regulated function in this model is delegated to the partner. The partner provides an alternative branded technical interface through which the customer may access Kvarn's services.
"The partner does not provide, intermediate, execute or exercise discretion over any crypto-asset service. On that basis, we regard it as a technical distribution/interface model rather than agency or outsourcing."
Joonas Järvinen, co-founder and chief investment officer at Kvarn
The question Järvinen refers to was addressed in a Q&A answer from the European Commission, published on 12 September 2024 and posted on ESMA's site.
The question was whether a CASP may designate persons or entities to provide crypto-asset services on its behalf as agents, as MiFID II allows, where they are not themselves authorised. The Commission answers that MiCA contains no provision allowing a CASP to designate third parties to receive and transmit client orders or to advise on crypto-assets. MiCA therefore provides no framework for agents acting on behalf of a CASP, and if a CASP appoints an agent, the agent must itself be a CASP.
Article 73 governs outsourcing, under which a CASP may contract out operational functions while retaining full responsibility, and cannot use the arrangement to circumvent its obligations.
Järvinen's position is that the Embedded model falls under neither.
Read the Commission's answer: ESMA Q&A 2143 on agents under MiCA
The Kvarn X Embedded partner product was launched at the same time as the Goobit arrangement, Järvinen says. Goobit is the first partner to be made public, and the company says it has further partnerships in the pipeline that will be announced together with the partners.
He describes demand as broad, coming from crypto brands, payment firms, fintechs, banks, investment platforms and other digital platforms. He points to large financial platforms bringing banking, payments, investments and crypto together in one ecosystem, and sees embedded crypto infrastructure as a natural part of that development.
Futureproof does not have one provider, but three. Järvinen confirms that Kvarn Capital provides the crypto-asset services under its CASP authorisation, that Kvarn Metals Ltd provides the gold component, and that a separate third party provides the interest-bearing component. Each service has its own provider and its own terms.
The third party providing the interest-bearing component is still not named.
Finansinspektionen has previously confirmed to Kaupr that the refusal was based in part on deficiencies in Goobit's money-laundering risk assessment, and that the deficiencies remained after the company was allowed to supplement its application. Kaupr asked Järvinen what assessment Kvarn made of this before the agreement was entered into.
He says the company conducts thorough and extensive due diligence on every potential partner before entering into an agreement, and that for the regulated services it does not rely on legacy KYC or AML assessments. Customers are onboarded under Kvarn Capital's own current KYC, AML and risk management processes, and Kvarn Capital provides the regulated services directly under its own authorisation, including onboarding, execution, custody and transfers.
The answer concerns how Kvarn handles customer due diligence itself. What the company weighed in its assessment of Goobit, he does not say.
Sources: Kvarn Capital, ESMA, Finansinspektionen, Goobit Group
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