On April 20, 2023, the European Parliament adopted Regulation (EU) 2023/1114 on markets in crypto-assets (MiCA). The European Council approved MiCA on May 16, 2023; it was published in the Official Journal of the European Union on June 9, 2023.
A limited number of rules set out in MiCA are already in effect, but most will come into force on December 30, 2024.
MiCA – Highlights and Scope
MiCA aims to create a harmonized regulatory framework for crypto-assets in the European Union, promote innovation and foster the use of crypto-assets while ensuring the financial stability of issuers and service providers. The regulation also addresses investor and consumer protection for the issuance, trading and custody of crypto-assets and aims to prevent market abuse on cryptocurrency exchanges.
Before MiCA, EU law did not regulate the provision of virtual asset services. Instead, virtual asset service providers were subject to the individual legislation of each EU member state.
MiCA applies to issuers of crypto-assets and businesses that provide crypto-asset services, and defines “crypto-asset” as “a digital representation of value or rights that can be transferred and stored electronically to using distributed ledger technology or similar technology.
MiCA distinguishes three types of crypto-assets:
| 1. | token referenced by asset (ARTs): a crypto-asset that is not an electronic money token and that purports to maintain a stable value by reference to another value, right or combination thereof, including one or more official currencies ; |
| 2. | electronic money token (EMT or e-money token): a crypto-asset that claims to maintain a stable value by referring to the value of an official currency; And |
| 3. | the residual category of “other” crypto-assetswhich captures all digital assets that do not fall into the other two categories (ART and EMT), and which includes, as a subset, utility tokens, i.e. cryptoassets that aim solely to provide access to a good or service. supplies from the issuer. |
The Regulation does not apply to assets that already fall within the scope of other EU legislation, including (but not limited to):
| A. | financial instruments and structured deposits falling within the scope of MiFID II (Directive 2014/65/EU); |
| b. | funds, as defined in PSD II (Directive 2015/2366/EU), other than EMT; |
| c. | deposits falling within the scope of the European Directive on deposit guarantee schemes (Directive 2014/49/EU), including structured deposits; And |
| d. | securitizations falling within the scope of the Securitization Regulation (Regulation (EU) 2017/2402). |
MiCA distinguishes between activities carried out on the primary market, i.e. the issuance of crypto-assets, and the provision of services on the secondary market, called crypto-asset services, among which (i) the custody and administration of crypto-assets (ii) advice on crypto-assets. crypto-assets, (iii) operate a crypto-asset trading platform, (iv) receive and transmit orders in crypto-assets, or (v) execute orders in crypto-assets.
In detail, MiCA explains:
- transparency and disclosure requirements for the issuance and trading of crypto-assets,
- requirements for issuing cryptoassets and monitoring issuers and service providers, and
- requirements for proper business organization of crypto asset issuers and crypto asset service providers.
Takeaways
As mentioned, the MiCA will enter into force on December 30, 2024. Crypto-asset operators must ensure that their corporate structure, corporate bodies and activity as issuers and/or service providers comply with the new ruler. Failure to do so may result in severe penalties.
