On 20 April 2023, the European Parliament adopted the Markets in Crypto-assets Regulation (hereinafter: MiCA Regulation) by a great majority.
It is a comprehensive regulation of the field of cryptocurrencies at the EU level, currently unique in the world. The goals, which the MiCA Regulation aims to achieve are transparency of crypto-asset transfers, control over crypto-asset service providers, consumer protection, prevention of market manipulation and prevention of money laundering, while still maintaining investment and development potential of the industry in the EU. It is part of the larger digital finance package, which, in addition to the MiCA proposal, also contains a digital finance strategy, a Digital Operational Resilience Act (DORA) – that will cover crypto-asset service providers as well – and a proposal on distributed ledger technology (DLT) pilot regime for wholesale uses.
Main solutions of the MiCA Regulation may be briefly presented as follows:
- Crypto-asset service providers will need an authorization to operate in the EU, which will be granted by national authorities and will be valid throughout the EU. As for the largest providers of crypto-asset services, national authorities will regularly send relevant information to the European Securities and Markets Authority (hereinafter: ESMA). Currently, crypto companies have to comply with 27 different regulatory frameworks in EU member states. Under MiCA, pan-European regulations will apply, allowing companies to operate across the entire EU market with the authorization granted in one member state.
- Introduction of important obligations crypto-asset service providers will have towards customers, including appropriate communication and business methods, adequate reserves to ensure liquidity and necessary reimbursement procedures in case of loss of customer funds. In addition, all so-called ‘stable coins’ will be overseen by the European Banking Authority (EBA), with the issuer’s presence in the EU a precondition for each issuance.
- Detailed rules regarding the prevention of abuse in the crypto-assets market, especially regarding market manipulation and insider trading.
- Establishment of a crypto-asset service providers register and determination of ESMA supervisory rights and sanctions for non-compliance in relation to providers.
- Monitoring the environmental footprint of actors in the crypto-assets market.
The regulation does not duplicate the updated legislation on anti-money laundering (hereinafter: AML). However, among other, it establishes enhanced checks in line with the EU AML framework for crypto-asset service providers, whose parent company is located in countries listed on the EU list of third countries considered at high risk for anti-money laundering activities, as well as on the EU list of non-cooperative jurisdictions for tax purposes. Same may apply for shareholders and management of crypto-asset service providers.
Non-fungible tokens (NFTs), i.e. digital assets representing real objects like art, music and videos, fall out of scope of MiCA, except if they fall under existing crypto-asset categories (separate regulation is foreseen for this part in the future).
The MiCA Regulation must additionally be approved by the Council of the EU, followed by publication in the Official Journal of the EU. Implementation is envisaged gradually over a period of two years, starting in July 2024.
