What Is Markets in Crypto-Assets (MiCA)?
The Markets in Crypto-Assets (MiCA) regulation is a landmark framework created by the European Commission (EC) that focuses on maintaining financial stability. It also is designed to protect investors and promote widespread transformation in the crypto asset sector in European Union (EU) countries.
Key Takeaways
- The Markets in Crypto-Assets (MiCA) regulation in a regulatory framework created by the European Union.
- MiCA entered the Official Journal of the European Union in June 2023, with consultation packages being released for public feedback at intervals.
- MiCA entered into force in June 2023, but the regulation will not be fully applied until December 2024.
History of Markets in Crypto-Assets (MiCA)
On Oct. 10, 2022, the EC’s Economic and Monetary Affairs Committee overwhelmingly voted (28 to one) to approve the first-ever blockchain-related asset regulation, paving the way for a vote by the full European Parliament before the end of 2022. The bloc’s national governments had previously signed off on MiCA.
The regulation entered into force (became law) in June 2023, although three consultation packages were released for public feedback. By June 30, 2024, Title III and Title IV will become applicable (can be enforced), with five more Titles (I, II, V, VI, VII) applying in December 2024. Titles VIII and IX deal with delegated acts and transitional and final provisions, which do not require public feedback or Member State adjustment periods.
European Securities and Markets Authority
The law allows providers of digital wallets and other crypto services to market and sell across the EU bloc if they register with national authorities. They must also satisfy minimum guarantees to safeguard investors and sustain financial steadiness.
Markets in Crypto-Assets Titles
MiCA has seven titles that address crypto-asset regulation, authorization, minimum requirements for providers, and jurisdiction responsibilities. The regulation defines three types of crypto-assets: asset-referenced tokens, e-money tokens, and crypto-assets other than the previous two.
Title VIII and IX discuss powers of adoption and the Commission’s responsibility to present a report to the European Parliament and the Council on the legislation’s effect and any developments. An interim report is due by June 30, 2025, and a final report by June 30, 2027.
Markets in Crypto-Assets Title I
Title I, Article 1 defines offering and trading platform requirements for publicly offered crypto-assets and entities involved in them. Article 2 defines who the regulation applies to, and Article 3 lists definitions of all terms used in the legislation, such as distributed ledger technology, utility token, consensus mechanism, crypto-asset service, and dozens of others.
Markets in Crypto-Assets Title II
Title II details who can create and offer a crypto-asset to the public. An entity that creates and plans to issue a crypto-asset that doesn’t meet the definition of an asset-referenced token or e-money token must meet specific criteria. An entity must:
- Meet the definition of a legal person
- Have written and published a crypto-asset whitepaper
- Have written and published marketing communications
- Notify the proper authorities in their member state and submit the whitepaper (required) and marketing communications (if requested)
- Comply with other offerer requirements
These criteria don’t apply to tokens rewarded for work done on a blockchain if the crypto-asset is offered for free. If it is a token intended to be used as a payment method or if it is a utility token, it is not considered a crypto-asset.
Critical to this title are the articles that outline what must be included in whitepapers and marketing communications for an entity to attempt to get a crypto-asset listed on a trading platform.
Markets in Crypto-Assets Title III
Title III defines asset-referenced tokens, which, by the EU’s definition, are tokens that try to stabilize their value using the value of another asset or right. This covers all crypto-assets whose value is tied to or backed by other assets, such as officially backed currencies like the euro or the dollar—many people know this as a stablecoin.
Asset-referenced tokens must be issued by an entity that meets the definition of a legal person and be a credit institution, which must follow specific requirements for its issuance.
Markets in Crypto-Assets Title IV
Title IV defines who can issue e-money tokens. E-money tokens are “electronic money,” referring to crypto-assets that represent official currencies. Issuers must be authorized credit or electronic money institutions. This Title also discusses how e-money can be issued and redeemed and how to write a whitepaper. It also defines the liabilities money issuers take on when offering an e-money token to the public.
Markets in Crypto-Assets Title V
Title V outlines who is authorized to provide crypto-asset services and where they can provide them based on their location within the Union. The law allows the following entities to offer services:
If a service provider does not meet the definition of a legal person, they are allowed to offer services if they are operating under a legal form that provides the same level of protection as those that do. Businesses must also comply with several provisions and ensure it is authorized and licensed in their Member State.
In the EU and many developed countries, a legal person is a business, individual, or organization that the law treats as a person. An entity that engages in activities a human can engage in (paying taxes, owning property, entering contracts, and so on) is a legal person in the eyes of the law.
This Title also allows service providers to provide cross-border services if they have informed the proper authorities in their Member State. It also defines obligations to clients and outlines security, governance, and operational requirements.
Markets in Crypto-Assets Title VI
Title VI is one of the shorter titles in the legislation. It addresses market abuse concerns and the scope of abuses the title covers. Other standard investment rules, such as public disclosure of inside information, insider trading, and market manipulation, are also outlined.
Markets in Crypto-Assets Title VII
This title issues instructions for authorities and lays out a cooperative framework between jurisdictions. Member States are required to appoint competent authorities and ensure they report to the European Banking Authority (EBA) and European Securities and Markets Authority (ESMA).
In addition to any powers Member States grant their regulators, the EU created minimum powers that all authorities within the union should have in this section.
MiCA Exclusions
One of the more interesting aspects of MiCA is that several blockchain-related assets are not considered crypto-assets, at least as far as falling under any definitions set in this legislation. For example, it mentions explicitly as excluded:
- Crypto assets that fall under the scope of financial instruments
- Those that qualify as deposits or structured deposits
- Assets that qualify as funds
- Those that qualify as securitization positions
- Crypto-assets that qualify as non-life or life insurance policies
- Pension product and social security schemes
- Non-fractionalized non-fungible tokens
- Transactions between certain public entities and groups
- Central Bank Digital Assets
- Non-transferrable digital assets
- Financial instruments that fall under other directives
What Is the Markets in Crypto-Assets Regulation?
The Markets in Crypto-Assets regulation is a European Union framework that defines crypto-assets, how they are regulated, who can regulate them, and requirements for anyone providing crypto products and services.
What Is the Crypto-Asset Market?
A crypto-asset is any blockchain-based digital asset that meets the European Union’s (EU) definitions. This market doesn’t include non-fungible tokens, deposits, and other financial items that meet specific criteria.
What Are the Different Types of Crypto-Assets?
According to the EU’s definition, crypto-assets are asset-referenced tokens, e-money tokens, and crypto-assets other than the previous two.
The Bottom Line
MiCA is a milestone in the cryptocurrency market since it is the first comprehensive regulation for the still-emerging technology. The framework defines the assets that fall under its jurisdiction, who can offer related products and services, and who has the authority to regulate and enforce the legislation. MiCA will be fully applicable by the end of December 2024.
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