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Brussels, |
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EU Regulation on Markets in Crypto-Assets (MiCA)
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The European legislation is written in Regulation (EU) 2023/1114 of 31 May 2023 and came into force on 29 June 2023. Subsequently, on 22 February 2024, the European Commission adopted a package of 4 Delegated Acts.
Delegated regulations specify the criteria for an asset-referenced token to be classified as significant, supervisory measures on products intervention powers, procedural rules for the exercise of the power to impose fines or periodic penalty payments by the European Banking Authority and fees charged by the European Banking Authority. Scope of the EU Regulation:
This Regulation establishes uniform rules for issuers of crypto-assets that have so far not been regulated by other European Union (EU) financial services acts and for providers of services in relation to such crypto-assets (crypto-asset service providers). The rules cover:
The Regulation applies to the issuing, offering to the public and admission to trading of crypto-assets, and provision of services in relation to crypto-assets. It distinguishes the following types of crypto-assets:
Offerors or persons seeking admission to trading of crypto-assets other than asset-referenced tokens and e-money tokens must:
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Issuers of asset-referenced tokens that offer them to the public or seek their admission to trading on a trading platform for crypto-assets must:
Issuers of electronic money tokens that offer them to the public or seek their admission to trading on a trading platform for crypto-assets must:
The European Banking Authority (EBA) classifies asset-referenced and electronic money tokens as ‘significant’ if certain criteria are met, such as their holders, value or transactions going above certain levels. In such cases, issuers of such significant asset-referenced tokens and electronic money tokens are subject to additional requirements and the EBA takes over the supervisory role.
Crypto-asset service providers must be:
Obligations for all crypto-asset providers require them to:
Specific rules cover:
The regulation does not apply to:
The European Commission presents a report to the European Parliament and the Council of the European Union at various stages once the regulation applies, on:
The Commission also has the power to adopt delegated and implementing acts.
The European Securities and Markets Authority, in cooperation with the EBA, submits a publicly available report to the Parliament and the Council, 12 months after the regulation enters into force and every year thereafter, on the application of the legislation and developments in crypto-asset markets.
The regulation amends:
FROM WHEN DOES THE REGULATION APPLY?
It applies from 30 December 2024. However, rules on asset-referenced tokens (Title III) and e-money tokens (Title IV) apply from 30 June 2024.
- be a legal person or a certain undertaking based in the EU;
- have authorisation from their home EU Member State; or
- be a credit institution which produces a crypto-asset white paper that is approved by the competent national authority;
- redeem their asset-referenced tokens at any time upon request of the holders at market value of the referenced assets or by delivering the referenced assets;
- publish a crypto-asset white paper and any marketing communication on their website and be liable for damages for incorrect information in the white paper;
- act honestly, fairly and professionally;
- communicate with actual and potential holders of the tokens in a fair, clear and non-misleading manner;
- act in the best interests of the holders of the tokens and treat them equally;
- establish and maintain effective and transparent procedures for handling complaints promptly, fairly and consistently;
- identify, prevent, manage and disclose any conflicts of interest;
- maintain at all times a reserve of assets covering the liabilities towards the holders of the tokens, and have own funds at least equal to the highest of the following:
- €350,000,
- 2% of the average amount of the reserve assets,
- a quarter of the fixed overheads of the preceding year;
- establish recovery and redemption plans for use if they are unable to meet their obligations.
Issuers of electronic money tokens that offer them to the public or seek their admission to trading on a trading platform for crypto-assets must:
- be authorised as a credit or electronic money institution;
- publish a crypto-asset white paper and any marketing communication on their website and be liable for damages for incorrect information in the white paper;
- comply with issuance, redeemability and marketing rules;
- issue the tokens at par value on receipt of funds;
- redeem upon a holder's request the tokens at any moment and at par value;
- invest the funds they receive in secure, low-risk assets in the same currency and deposit them in a separate account in a credit institution;
- establish recovery and redemption plans for use if they are unable to meet their obligations.
The European Banking Authority (EBA) classifies asset-referenced and electronic money tokens as ‘significant’ if certain criteria are met, such as their holders, value or transactions going above certain levels. In such cases, issuers of such significant asset-referenced tokens and electronic money tokens are subject to additional requirements and the EBA takes over the supervisory role.
Crypto-asset service providers must be:
- a legal person or certain undertaking authorised by their national authority as a crypto-asset service provider, with a registered office in a Member State where they carry out at least part of their services, effective management and at least one of the directors in the EU; or
- under certain conditions a credit institution, central securities depository, investment firm market operator, e-money institution, management company of the undertakings for the collective investment in transferable securities or alternative investment fund.
Obligations for all crypto-asset providers require them to:
- act honestly, fairly and professionally in their actual and potential clients’ best interests;
- provide clients with fair, clear and non-misleading information;
- not deliberately or negligently mislead clients on the real or perceived advantages of crypto-assets, and warn them of the risks involved;
- make their pricing, costs, fee policies, and climate and environment-related impact of each crypto-asset prominently available on their website;
- have in place prudential safeguards at least equal to the higher of the following:
- the permanent minimum capital requirements in Annex IV, or
- one quarter of the preceding year’s fixed overheads;
- ensure members of the management body are of good repute and have the knowledge, experience, skills and time to perform their duties effectively;
- implement policies and procedures to prevent any money laundering, terrorist financing or other offences;
- keep clients’ crypto-assets and funds separate from other assets and not use them on their own account;
- establish and maintain effective and transparent procedures to handle clients’ complaints promptly, fairly and consistently;
- maintain and operate an effective policy to identify, prevent, manage and disclose conflicts of interest;
- take all reasonable steps to avoid any risk when outsourcing activities;
- devise a plan for an orderly wind-down of their activities if necessary.
Specific rules cover:
- takeovers of issuers of asset-referenced tokens and crypto-asset service providers;
- measures to prevent and ban market abuse, such as insider dealing and misuse of insider information;
- powers and roles of national authorities, the EBA and the European Securities and Markets Authority.
The regulation does not apply to:
- crypto-assets that are covered by other EU financial services acts (e.g. those that qualify as financial instruments, pensions or insurance products);
- providers of crypto-asset services exclusively for their parent companies or subsidiaries, liquidators and administrators in insolvency proceedings;
- the European Central Bank and national central banks, the European Investment Bank, the European Financial Stabilisation Mechanism, the European Stability Mechanism and public international organisations;
- crypto-assets that are unique and not interchangeable (‘fungible’) with others. Cryptoassets not covered by MiCA include emerging trends like the DeFi (Decentralized Finance) sector and non-fungible tokens (NFTs). The DeFi industry represents a novel approach to financial services, bypassing traditional intermediaries and relying on automated protocols, as defined by the European Central Bank. MiCA's scope excludes several aspects of the digital asset realm, as highlighted by María José Escribano. DeFi, non-fungible tokens, security tokens, and cryptoasset finance fall into this category. Security tokens already have their tailored regulations, while the distinctive features of the others necessitate further analysis for creating suitable regulatory frameworks to address their associated risks. Nonetheless, MiCA is undeniably a positive step toward robust consumer protection while mitigating potential threats to financial stability. Conversely, non-fungible tokens are unique and indivisible representations of digital assets, such as art, videos, tweets, and more. Unlike interchangeable cryptocurrencies, NFTs are one-of-a-kind and linked to distinct assets. Additionally, Central Bank Digital Currencies (CBDCs) are also outside MiCA's jurisdiction.
The European Commission presents a report to the European Parliament and the Council of the European Union at various stages once the regulation applies, on:
- latest developments on crypto-assets (after 18 months);
- interim assessment of the regulation (after 24 months);
- application of the regulation (after 48 months).
The Commission also has the power to adopt delegated and implementing acts.
The European Securities and Markets Authority, in cooperation with the EBA, submits a publicly available report to the Parliament and the Council, 12 months after the regulation enters into force and every year thereafter, on the application of the legislation and developments in crypto-asset markets.
The regulation amends:
- Directive 2013/36/EU (capital requirements);
- Directive (EU) 2019/1937 (protection of persons who report breaches of EU law);
- Regulation (EU) No 1093/2010 (establishing the EBA);
- Regulation (EU) No 1095/2010 (establishing the European Securities and Markets Authority).
FROM WHEN DOES THE REGULATION APPLY?
It applies from 30 December 2024. However, rules on asset-referenced tokens (Title III) and e-money tokens (Title IV) apply from 30 June 2024.
