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On 20 April 2023, the European Union (EU) Lawmakers
approved the Markets in Crypto – Asset Regulation (MiCA) and
the regulation on information accompanying transfers of funds and
certain crypto – assets, i.e. the “Travel
Rule”.
The MiCA is part of the EU’s broader digital financial
package, which includes the Digital Operational Resilience Act and
the Pilot Regime on Distributed Ledger Technology. These
regulations aim to foster innovation and adoption of new financial
technologies while ensuring consumer protection and promoting
financial stability.
The MiCA regulation pertains to individuals, organizations, and
other entities engaged in the issuance, public offering, and
admission to trading of crypto – assets or those providing
related services within the EU.
Definitions
Remarkably, the MiCA defines a crypto – asset as a
“digital representation of value or a right which may be
transferred and stored electronically, using distributed ledger
technology or similar technology”.
It then categorizes crypto – assets into 3
sub-categories:
- E-money tokens: a type of crypto – asset “which is
meant to be a means of exchange and maintains a stable value by
referring to the value of a fiat currency that is legal
tender” - Asset – references tokens: “a type of crypto –
asset which is meant to maintain a stable value by referring to the
value of several currencies that are a legal tender (fiat
currencies), one or several commodities, or one or several crypto
– assets, or a combination of such assets” - Other Crypto – Assets: a type of crypto asset which
“provides digital access to a good or service available on
Distributed Ledger Technology and is only accepted by the issuer of
that token”
Additionally, one of the notable requirements of the regulation
is that crypto asset issuers must produce a whitepaper outlining
their operations, the characteristics of the crypto – assets
they issue, project timelines, risks, and other relevant details.
This requirement is in line with the EU Prospectus Regulation,
which aims to provide a unified disclosure system for crypto
– asset issuers.
The MiCA legislation is expected to come into force around July
2023, with a provision relating to stablecoins applying from July
2024. Other sections regarding other types of crypto – assets
and provisions relating to service providers and travel rules will
be effective from January 2025.
Impact on the Crypto Industry
MiCA establishes a wide – range framework for providers
and services related to crypto assets and emphasizes safeguarding
investors and maintaining the integrity of the market. Coupled with
Anti – Money Laundering regulations, MiCA is poised to bring
significant changes to the landscape of cryptocurrency sector
within the European Union.
Finally, despite the obstacles it presents, MiCA is regarded as
a favorable step towards the advancement of the crypto
industry.
Next Steps
The European Banking Authority and the European Securities
Market Authority plan to develop technical standards and guidelines
to complement the MiCA. In the meantime, technical standards and
recommendations will be created by the European Banking Authority
and the European Securities Markets Authority to sustain the
regulation.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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