[DigitalToday reporter Yoonseo Lee (이윤서)] Ripple has moved a step closer to entering the European Union's Markets in Crypto-Assets (MiCA) framework after securing preliminary approval as a crypto-asset service provider (CASP) in Luxembourg.

On June 28 local time, blockchain media outlet CryptoSlate reported that Ripple received a so-called "green light letter" from Luxembourg's financial regulator, the CSSF, on June 23. It added that the move, combined with an electronic money institution (EMI) licence it completed in the same jurisdiction in February, strengthened its European business base.

The approval gives Ripple a foothold to expand services to 30 countries in the European Economic Area ahead of the July 1 deadline for MiCA transitional measures. The document, however, is not a formal licence and is closer to a conditional approval. While the CSSF judged it acceptable in principle, Ripple must prove, service by service, that its Luxembourg entity can carry out the business it applied for on the ground to obtain authorisation.

The key is the substance of the local entity. MiCA examines the operating capability of the European entity directly, rather than the track record of the global headquarters. Ripple must specify which services it seeks to be authorised for, and permissions to transfer and custody crypto assets and to operate a trading platform require separate approvals. It must also submit a three-year business plan that reflects both boom and downturn periods.

Capital requirements also remain. The European Securities and Markets Authority (ESMA) requires the local entity to have own funds or insurance suited to the services it provides. The financial condition of the Ripple group as a whole is unlikely to be seen as meeting requirements for the Luxembourg subsidiary.

The CSSF is expected to scrutinise governance most strictly. ESMA says the local entity must have own funds or insurance that matches the services it provides, and it set a standard that authorised firms must have real staff making real decisions within the European Union. This means it will not allow a structure in which a firm maintains only a paper office while handling key work in other regions such as San Francisco. As a result, Ripple must have executives with real authority, a chief executive officer who is dedicated to the company's work, and limits on what work can be handed back to the parent company.

Operational evidence is also required. It must present to regulators verification of the identities of executives and major shareholders, a map of the company's governance structure, a plan to separate client assets from company funds, wallet security and key management, and recovery procedures. ESMA in particular has flagged as a high-risk combination a structure that both issues stablecoins and provides crypto services. This intersects with Ripple's plan to issue RLUSD while also providing related asset services.

RLUSD is a stablecoin with about $1.6 billion in circulation and is classified under MiCA as an e-money token. That classification applies a second regulatory framework to Ripple at the same time. Over the past year, the European Banking Authority (EBA) confirmed through a no-action letter and follow-up opinion that transferring or custodying stablecoins on behalf of customers constitutes a payment service. That is also why Ripple secured the EMI licence alongside MiCA authorisation.

If this combination is completed, Ripple can propose to European banks a single, regulated integrated service that handles both cash and crypto assets. It is also a structure institutional clients have been seeking. Still, because Ripple would be both the issuer of RLUSD and the service provider for it, a conflict-of-interest prevention framework remains a key issue in the final review. The CSSF is expected to closely examine how Ripple separates the two roles.

Market reaction was limited. XRP traded around $1.10 on June 25 and showed no major move on the news. It is possible to interpret this as the market having already priced in Ripple's regulatory progress to some extent, but what is clear is that actual trading volume matters more than price.

Ultimately, the approval is closer to a starting point than an end point for European expansion. Ripple must prove that its Luxembourg entity can "actually" carry out payments, custody, transfers and stablecoin-related work. Whether the CSSF believes the contents of the application can be implemented on the ground is expected to be the key turning point going forward.

More licensing momentum! Ripple has secured its preliminary Crypto Asset Service Provider (CASP) license in Luxembourg, paving the way for the full rollout of Ripple Payments across the EEA and full MiCA compliance: https://t.co/APQcYnCy9c The next wave of regulated digital…