The European Union (EU) has taken a significant step by introducing the Markets in Crypto Assets Regulation (MiCA), signaling the establishment of a more integrated framework within the EU. MiCA, as a symbol of the possibility of coordinating cryptocurrency regulations internationally, may serve as a blueprint for other jurisdictions worldwide.
MiCA is not just an independent regulation; it is an integral part of the comprehensive digital financial strategy formulated by the European Commission. This broader strategy covers various aspects, including the upcoming Digital Operational Resilience Act (DORA), which includes provisions applicable to cryptocurrency service providers. Another notable inclusion is the new regulation surrounding Distributed Ledger Technology (DLT) pilot regime, with a focus on strengthening the operation of financial market infrastructure based on DLT principles.
MiCA covers a wide range, involving various aspects from issuing unsupported crypto assets to stablecoins, from cryptocurrency trading platforms to wallets storing them. It aims to provide an integrated regulatory framework. The regulation defines crypto assets as digital representations of value or rights transferable and storable in electronic devices. It categorizes them as utility tokens, asset-referenced tokens, and electronic money tokens, effectively including crypto assets not currently regulated by existing financial services regulations.
The new regulation emphasizes transparency, disclosure, authorization, and supervision, all of which have significant implications. It is noteworthy that Crypto Asset Service Providers (CASP) need authorization from national competent authorities to provide their services throughout the EU. This authorization essentially acts as a passport for their operations within the Union.
Switzerland and any other non-EU countries are affected by MiCA as long as they provide crypto-related services in EU countries. This means Swiss companies need to analyze whether they comply with MiCA regulations and, if so, whether they possess the necessary licenses.
MiCA generally applies to three categories of individuals: (i) issuers of crypto assets, (ii) Crypto Asset Service Providers (CASP), and (iii) any behavior involving trading crypto assets on a crypto asset trading platform operated by an authorized crypto asset service provider or requests for such trading on such a platform.
MiCA distinguishes between different types of crypto assets:
- Asset-referenced tokens: Crypto assets that are not electronic money tokens and maintain stable value by reference to other values, rights, or their combinations (including one or more official currencies).
- Electronic money tokens: Crypto assets that maintain stable value by reference to the value of an official currency.
- Utility tokens: Crypto assets used solely for providing goods or services offered by their issuers.
MiCA introduces licensing requirements for Crypto Asset Service Providers, issuers of asset-referenced tokens, and issuers of electronic money tokens. Overall, CASPs will trigger licensing requirements unless they are already credit institutions licensed under MiFID.
In terms of regulation, at the member state level, competent authorities will be responsible for supervising CASPs and ensuring their compliance with the provisions of MiCA. CASPs with active users exceeding ten million will be classified as "significant CASPs." While these significant CASPs will continue to be supervised by the relevant competent authorities, the European Securities and Markets Authority (ESMA) will be granted "intervention powers."
Regarding stablecoins, the regulatory realm involves the intervention of the European Banking Authority (EBA). Specifically, stablecoins with user numbers exceeding ten million or assets under reserve exceeding EUR 5 billion will be regulated by the EBA. Additionally, the European Central Bank will have the power to veto and influence the operation of any stablecoin it deems problematic.
In terms of market abuse restrictions, MiCA sets its own market abuse rules for the crypto asset market to safeguard market integrity. These rules will apply to crypto assets traded on crypto asset trading platforms operated by authorized crypto asset service providers.
Overall, the implementation of MiCA will have far-reaching implications for the crypto asset markets within and outside the EU, bringing about a stricter and more unified regulatory framework for the entire industry. At the same time, it provides a model for other countries and regions to establish healthier and more sustainable crypto asset markets.
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