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EU Markets in Crypto-Assets (MiCA) Regulation Expected to Enter into Force in Early 2023

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Summary

The Markets in Crypto-Assets (MiCA) Regulation is expected to enter into force in early 2023 and is intended to close gaps in existing EU financial services legislation. MiCA covers three types of crypto-assets, including Electronic Money Tokens, Asset-Referenced Tokens, and all other crypto-assets, with different requirements for each type. MiCA also stipulates rules for issuers of crypto-assets and requires the provision of certain crypto-related services to be authorized by a "crypto-asset service provider." Additionally, MiCA contains a set of market abuse rules modeled after the existing rules for the traditional capital market. Once formally approved by the Council of the EU, MiCA will enter into force 20 days later, with the rules for stablecoins taking effect from spring 2024.

Q&As

What type of crypto-assets does the MiCA Regulation regulate?
The MiCA Regulation regulates primary market activities (issuance/public offerings) and access to the secondary market (listings) as well as the provision of certain crypto-related services. It regulates three sub-categories of crypto-assets: Electronic Money Tokens (EMTs), Asset-Referenced Tokens (ARTs), and all other crypto-assets that are not EMTs or ARTs.

What are the rules for issuers of EMTs and ARTs?
For issuers of EMTs and ARTs, MiCA lays forth stricter rules due to related concerns with regard to financial stability and monetary sovereignty. Publicly offering or listing ARTs or EMTs within the EU generally requires prior authorization and may only be done by the issuer itself unless the issuer gives another person written permission to do so. EMTs may only be offered/listed by authorized credit institutions or e-money institutions upon prior notification of their supervisory authority as well as notification and publication of the required white paper. For ARTs, issuers must be established in the EU to receive authorization and—in contrast to the rules for the other MiCA-token-types—not only notify but also submit the required white paper for prior approval to the competent authority before publishing it.

What are the obligations for crypto-asset service providers under MiCA?
The provision of crypto-asset services in the EU will generally require prior authorization as a "crypto-asset service provider" (CASP) and a seat in the EU. MiCA stipulates a broad set of general and service specific rules CASPs will need to adhere to. These include governance, capital/insurance and transparency requirements.

How does MiCA regulate market abuse?
MiCA stipulates a set of market abuse rules modeled after the existing rules for the traditional capital market under the Market Abuse Regulation (MAR). In this regard, MiCA includes a duty of issuers, offerors and persons seeking admission to trading to disclose inside information and prohibitions of insider dealing, unlawful disclosure of inside information and market manipulation as well as rules for the prevention and detection of market abuse.

What are the rules for management bodies of ART and EMT issuers?
MiCA stipulates a number of obligations for management bodies. For example, it requires the management bodies of ART issuers and CASPs to "assess and periodically review" the effectiveness of the policy arrangements and compliance procedures. Moreover, management bodies of ARTs and sEMTs issuers must ensure effective and prudent management of the asset reserves and that the issuance or redemption of tokens is always matched in the reserves. Additionally, to further protect holders of crypto-assets, the management body of an entity can separately

AI Comments

👍 This article provides a detailed and thorough overview of the upcoming Markets in Crypto-Assets (MiCA) Regulation, including the scope of application, obligations for issuers and service providers, and market abuse rules.

👎 This article fails to provide a comprehensive discussion of the implications of the MiCA Regulation on popular USD-pegged stablecoins.

AI Discussion

Me: It's about Europen Union's upcoming Markets in Crypto-Assets (MiCA) Regulation which is expected to enter into force in early 2023. It's intended to close gaps in existing EU financial services legislation by establishing a harmonized set of rules for crypto-assets and related activities and services.

Friend: That's fascinating. What are the implications of this regulation?

Me: The regulation will impose restrictions on the issuance and use of stablecoins and will require white papers to be issued before crypto-assets can be offered to the public or listed on a trading platform. It will also require crypto-asset service providers to obtain prior authorization before providing such services. Additionally, it will impose market abuse rules modeled after the existing rules for the traditional capital market. Overall, this regulation should bring much needed legal clarity and stability to the crypto-asset market in the EU.

Action items

Research the other components of the digital finance package, such as the Digital Operational Resilience Act (DORA) and the DLT Pilot Regime Regulation.
Become familiar with the different types of crypto-assets and the rules that apply to each type.
Understand the obligations for issuers and service providers of crypto-assets, such as the requirement to issue white papers and the capital requirements for issuers of EMTs and ARTs.

Technical terms

MiCA: Markets in Crypto-Assets Regulation - a proposed EU regulation intended to close gaps in existing EU financial services legislation by establishing a harmonized set of rules for crypto-assets and related activities and services.
DORA: Digital Operational Resilience Act - a proposed EU regulation intended to ensure the operational resilience of digital services.
DLT Pilot Regime Regulation: Distributed Ledger Technology Pilot Regime Regulation - a proposed EU regulation intended to provide a legal framework for the testing of innovative applications of distributed ledger technology.
EMTs: Electronic Money Tokens - a type of crypto-asset that purports to maintain a stable value by referencing to the value of one official currency.
ARTs: Asset-Referenced Tokens - a type of crypto-asset that aims to maintain a stable value by referencing to any other value or right or a combination thereof, including one or more official currencies.
NFTs: Non-Fungible Tokens - a type of crypto-asset that is unique and not fungible with other crypto-assets.
DeFi: Decentralized Finance - a type of financial service that is provided in a fully decentralized manner without any intermediary.
DAO: Decentralized Autonomous Organization - a type of organization that is operated by a set of rules encoded as computer programs called smart contracts.
MiFID II: Markets in Financial Instruments Directive 2014/65/EU - a European Union directive that regulates investment services across the EU.
Prospectus Regulation: Prospectus Regulation 2017/1129/EU - a European Union regulation that sets out the rules for the content, approval and publication of prospectuses for public offerings of securities.
MAR: Market Abuse Regulation - a European Union regulation that sets out rules for the prevention and detection of market abuse.
CS MAD: Capital Markets and Markets in Financial Instruments Directive - a European Union directive that regulates the capital markets and markets in financial instruments.