A Helsinki-based crypto asset management firm has made headlines by securing a Markets in Crypto-Assets regulation (MiCA) license from Finland’s Financial Supervisory Authority. This achievement is touted as a first for the European Union, allowing the company to offer regulated, managed yield-generating services through decentralized finance (DeFi) protocols.
With this MiCA license, the firm can provide a range of services, including portfolio management, custody, and asset transfers, specifically tailored for both retail and institutional investors. In a press release, Tesseract Group’s CEO James Harris clarified that there are no minimum investment thresholds for retail clients, while corporate treasuries are expected to begin with deposits of around $1 million.
The firm positions itself as the first regulated European entity offering yield-generating services through active portfolio management across DeFi protocols. Tesseract currently manages over $500 million in assets and has successfully generated $20 million in yield across fifteen different crypto assets.
Tesseract’s Managed DeFi product diversifies investments across various strategies, including yield farming, lending, staking, liquidity provision, and arbitrage on carefully vetted DeFi protocols. The firm continually adjusts these allocations to manage risk and respond to evolving market conditions. When questioned about how Tesseract determines which protocols or strategies to incorporate, Harris noted that the firm relies on a robust risk management framework without divulging specific criteria.
As the EU continues to roll out MiCA, which fully comes into effect in December 2024, it establishes uniform regulatory requirements for crypto firms in the region. While some prominent players like Tether have opted against pursuing MiCA compliance due to its associated requirements, other companies have begun to develop MiCA-compliant products. However, the adoption of these products, especially in relation to stablecoins, remains slower compared to their U.S. dollar-backed counterparts.
Despite the promising framework that MiCA offers to centralized entities, its applicability to DeFi remains ambiguous. The regulation explicitly excludes services offered in a “fully decentralized manner,” yet the definition of what constitutes “fully decentralized” is still open to interpretation. Tesseract has acknowledged this complexity and emphasizes its adherence to stringent anti-money laundering (AML) and know your customer (KYC) compliance standards, categorizing its managed yield-generating offerings as leaning more towards centralized exchange operational models rather than purely DeFi-native platforms.
In addressing concerns around smart contract and counterparty risks, Harris highlighted Tesseract’s investment in institutional-grade compliance systems, including CASP registration and ISO27001/SOC2 certifications. These credentials underscore the firm’s commitment to maintaining high standards for safeguarding sensitive information and customer data. The firm employs comprehensive credit due diligence processes and establishes collateral requirements based on borrower ratings. Additionally, it ensures that client funds are legally separated, protecting individual clients’ assets from the firm’s operational balance sheet and other clients’ holdings.
Founded in 2018, Tesseract gained significant attention after raising $25 million in a Series A funding round in 2021, attracting notable backers such as Augmentum Fintech, Coinbase Ventures, Wintermute, and Woorton. As the regulatory landscape continues to evolve, Tesseract aims to navigate the complexities of the DeFi market while ensuring compliance and transparency for its investors.
