When Referrals Become Regulated

Many Web3 projects and individuals earn fees for introductions, referrals, and deal sourcing. In the European Union, the legal question is when an “introducer” crosses into regulated intermediation under MiFID II or MiCA.

MiFID II: when an introduction becomes an investment service

MiFID II Article 5 requires authorisation for investment services. “Investment advice” is a personal recommendation on transactions in financial instruments (Article 4(1)(4)). Annex I lists the key services for introducers. The most relevant are reception and transmission of orders, execution of orders, placing, and investment advice.

A referral model enters MiFID II territory when the introducer does more than general marketing. Common trigger points are:

• taking a client instruction to buy or sell, then passing it onward.

• negotiating price, size, timing, or settlement for a client.

• giving a client-specific recommendation on a financial instrument token.

• arranging placements for an issuer and charging a transaction-linked fee.

• acting as an external sales channel for an authorised firm.

MiFID II also provides a route for “tied agents.” A tied agent acts for one authorised investment firm. The authorised firm bears full responsibility (Article 4(1)(29)). Member States set tied-agent registration and supervision rules (Article 29).

MiCA: when an introduction becomes a crypto-asset service

MiCA Article 59 prohibits providing crypto-asset services in the Union without authorisation. The provider must be established in a Member State. MiCA defines a list of “crypto-asset services” (Article 3(1)(16)). For introducers, the most sensitive services are:

• reception and transmission of orders for crypto-assets on behalf of clients.

• execution of orders for crypto-assets on behalf of clients.

• placing of crypto-assets.

• exchange of crypto-assets for funds or for other crypto-assets.

• advice on crypto-assets.

MiCA also covers custody and administration, operation of a trading platform, portfolio management, and transfer services.

MiCA uses functional definitions. “Reception and transmission” covers receiving an order and passing it to a third party for execution. “Placing” covers marketing crypto-assets to purchasers on behalf of an offeror. “Advice” covers a personal recommendation to a client.

Non-custodial design reduces custody exposure. It does not remove authorisation risk. Order handling, execution, placing, or personal recommendations can still trigger MiCA.

Third-country firms and “exclusive initiative” under MiCA

An offshore entity does not, by itself, remove EU exposure. MiCA Article 61 allows third-country service only at the client’s own exclusive initiative. Solicitation or promotion in the Union can defeat that route. Article 61 also limits follow-on services to the same type of service and the same provider.

Case study: introducer + non-custodial interface

A company incorporated offshore runs a crypto-only, non-custodial interface for professional counterparties. Users connect their own wallets. The interface shows third-party protocol yields. Users interact directly with external protocols. The company holds no client keys or fiat. The company earns fees from partner referrals and introductions. It also applies access controls and geo-blocking in selected jurisdictions.

If the curated opportunities involve financial instrument tokens, MiFID II becomes primary. A “deal introduction” can become “placing” or “investment advice.” That risk rises with client-specific steering and deal execution involvement. A transaction-linked success fee can support an inference of intermediation.

If the activity involves MiCA crypto-assets, the question is whether the company provides a MiCA service. Referral codes and general marketing often sit outside authorisation. This requires no order reception, order routing, execution, placing, or advice. The risk rises where the introducer curates gated dealflow and actively solicits participation.

Work delivered in the case study included:

• mapping the full service flow against MiFID II and MiCA definitions.

• classifying tokens and activities by regime and perimeter.

• drafting referral and introduction terms with clear activity limits.

• reviewing EU targeting signals and third-country “exclusive initiative” controls.

• preparing a licensing or partnering path where the business model required regulated services.

Offshore structuring: what it solves, and what it does not

Offshore centres vary. Some impose licensing or registration for digital asset services. Bermuda restricts carrying on “digital asset business” in or from within Bermuda without a licence. The British Virgin Islands restricts providing a “virtual asset service” in or from within the Virgin Islands without registration. The Bahamas’ Digital Assets and Registered Exchanges Act, 2024 sets a registration regime for digital asset businesses. The BVI Act also deems certain BVI companies to be carrying on from within the territory.

Offshore incorporation can help with corporate administration and contracting. It does not neutralise EU rules for EU-facing operations. EU supervisors look at where the service is provided and how it is promoted.

EU-facing indicators include EU staff, EU-targeted marketing, and EU client onboarding. Indicators also include EU payment rails and EU events. Where these indicators exist, the licensing risk usually remains. The practical options are to stay outside the regulated service definitions, or move regulated functions into an authorised EU entity or partner.

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Prokopiev Law Group can advise on mapping introducer activity to MiFID II and MiCA, drafting referral and introduction terms, and designing an offshore/EU operating split.

Contact us to review your service flow, fee mechanics, marketing footprint, and EU nexus.

The information provided is not legal, tax, investment, or accounting advice and should not be used as such. It is for discussion purposes only. Seek guidance from your own legal counsel and advisors on any matters. The views presented are those of the author and not any other individual or organization. Some parts of the text may be automatically generated. The author of this material makes no guarantees or warranties about the accuracy or completeness of the information.