The European Parliament approved the long-awaited Regulation on Markets in Crypto-Assets (MiCA)
21 April 2023
On 20.04.2023, the European Parliament approved the long-awaited Regulation on Markets in Crypto-Assets, also known as “MiCA“, which introduces a comprehensive regulatory framework regarding the authorization and supervision of (i) issuers of certain types of crypto-assets, as well as of (ii) crypto-asset service providers, in the EU. MiCA also provides rules, ensuring the protection of holders of crypto-assets in the issuance, offering to the public and admission to trading on a trading platform for crypto-assets, as well as measures to prevent market abuse.
Below we provide a brief overview of the new regulation, as well as information on the next steps, which need to be taken, before MiCA can officially become part of the EU legislation.
I. Issuers of certain types of crypto-assets
MiCA introduces a number of new rules for issuers of certain types of crypto-assets, i.e. for persons, offering to the public crypto-assets or seeking the admission of such crypto-assets to a trading platform for crypto-assets. These rules differ depending on the type of crypto-asset being offered. MiCA defines three types of crypto-assets that fall within the broader concept of “crypto-asset”, also defined in the regulation, but which do not exhaust it. These three types of crypto-assets are as follows:
- Asset-referenced tokens – а crypto-asset that is not an е-money token and that purports to maintain a stable value by referencing to any other value or right or a combination thereof, including one or more fiat currencies;
- E-money tokens – a crypto-asset that purports to maintain a stable value by referencing to the value of one fiat currency;
- Utility tokens – a crypto-asset which is only intended to provide access to a good or a service supplied by the issuer of that token.
The new rules include an authorization regime for issuers of asset-referenced tokens and e-money tokens; issuance of a white paper and its notification to the competent authority; rules on the marketing communications; rules to prevent conflicts of interest; requirements to maintain the systems and security access protocols in accordance with the applicable standards, etc.
II. Crypto-asset service providers
MiCA introduces an authorization regime for crypto-asset service providers, including general rules for compliance with prudential and organizational requirements, as well as obliges crypto-asset service providers to ensure mechanisms for safeguarding of clients’ crypto-assets and funds, a complaint handling procedure, mechanisms for prevention of conflicts of interest, etc.
In addition to these general requirements applicable to all crypto-asset service providers, MiCA also envisages some specific requirements, depending on the particular crypto-asset service provided, relevant to it.
III. Entry into force of MiCA
The European Parliament’s approval of MiCA is a strong signal that there is political will from the EU for the new regulation to enter into force very soon. However, in order for this to happen, MiCA will have to be approved by the other EU legislative body – the Council of the EU, only after which MiCA will formally be adopted as EU law.
Once adopted as EU law, MiCA will enter into force 20 days as of its publication in the Official Journal of the EU, however according to the approved draft by the European Parliament, MiCA will apply in the EU member states at a later point in time and in stages as follows:
- The rules regarding the offering to the public, respectively the admission to trading on a trading platform for crypto-assets of (i) asset-referenced tokens, as well as (ii) e-money tokens, will apply 12 months after the entry into force of MiCA;
- All other rules, including these regarding crypto-asset service providers and the conditions for the provision of their activities, will apply 18 months after the entry into force of MiCA.
Author: Konstantin Mladenov