MiCA

EU’s MiCA Regulation: A New Era for Crypto Markets

In June 2023, the EU published Regulation (EU) 2023/1114, known as the Markets in Crypto Assets (‘MiCA’) Regulation, along with Regulation (EU) 2023/1113, concerning information accompanying transfers of funds and certain crypto-assets (‘TFR’).

MiCA’s rules on the issuance and offering of stablecoins will apply from 30 June 2024, while other provisions relevant to the provision of services related to crypto-assets will apply from 30 December 2024. TFR is also set to apply from 30 December 2024.

It is anticipated that MiCA will supersede the bespoke national regimes currently in place in various EU member states, including the existing Cyprus regime for crypto-asset service providers (a.k.a. virtual-asset service providers).

The EU’s adoption of MiCA Regulation marks a significant milestone in regulating the burgeoning crypto-assets market. MiCA aims to bring clarity, security, and harmonisation across the EU in this rapidly evolving sector. MiCA balances innovation (by not regulating the underlying technology) with the need for investor protection, setting a global benchmark in crypto regulation.

MiCA applies to natural and legal persons and certain other undertakings that are engaged in the issuance, offer to the public and admission to trading of crypto-assets or provide services related to crypto-assets in the EU.

Crypto-asset under MiCA is defined as ‘any digital representation of value or rights which may be transferred and stored electronically, using distributed ledger technology (DLT) or similar technology’.

Key Features of MiCA

1. Comprehensive Crypto-Asset Taxonomy: MiCA differentiates between 3 groups of crypto-assets, each of which a separate set of requirements apply:
   • Asset-referenced tokens (ARTs): crypto-asset that is not an e-money token and that purports to maintain a stable value by referencing another value or right or a combination thereof (e.g. commodities, other crypto-assets, currency baskets etc.).
   • E-money tokens (EMTs): crypto-asset that purports to maintain a stable value by referring to the value of one official currency (for instance EUR, GBP, USD).
   • Other crypto-assets: a catch all category that aims to cover all other crypto-assets (other than ARTs and EMTs) including utility tokens. ‘Utility token’ means a type of crypto-asset that is only intended to provide access to a good or a service supplied by its issuer.
2. Regulations for Issuers and Providers (CASPs / VASPs): The regulation sets stringent operational, governance, and compliance requirements for crypto-asset issuers/offerors and service providers, ensuring transparency and investor protection.
3. Consumer Protection Focus: MiCA prioritises consumer safeguards, mandating clear risk disclosures and robust measures to secure client assets.
4. Stablecoins and Market Integrity: The regulation addresses the potential impact of stablecoins on financial stability and includes provisions to prevent market abuse.
5. Inclusion of DeFi and NFTs: While decentralized finance (DeFi) and non-fungible tokens (NFTs) aren’t within the scope of the regulation (save for some exceptions), MiCA lays a foundation for their potential future regulation.
6. Global Implications: MiCA extends to entities operating within the EU, including non-EU-based firms, ensuring a unified regulatory approach.

For a more comprehensive overview of MiCA, please refer to our recent webinar on MiCA which can be accessed here.