The proposed European Union Regulation on Markets in Crypto Assets, or MiCA, (hereinafter the “regulation”) was put to a vote in the European Union Pa
The proposed European Union Regulation on Markets in Crypto Assets, or MiCA, (hereinafter the “regulation”) was put to a vote in the European Union Parliament’s Committee on Economic and Monetary Affairs on March 14, 2022, and in the end, the proposed amendment to ban or restrict proof-of-work-based crypto assets, which would have effectively resulted in a ban on Bitcoin (BTC), was rejected.
The question of how crypto assets will be assessed from an environmental regulation perspective remains, however, with the Member of the European Parliament in charge of the text indicating that crypto assets will be included, like all other financial products, in the area of the union’s taxonomy (the process of classifying economic activities that have a favorable impact on the environment), without specifying the treatment of these assets in view of this taxonomy.
The proposed regulation is part of the digital finance package that also includes a proposal for a pilot scheme for market infrastructures based on distributed ledger technology (DLT) of interest to the security token sector, adopted by the Parliament’s Economic and Monetary Affairs Committee in January this year and due to come into force by the end of 2022.
The EU Commission has been considering several options for regulating the crypto asset sector. It finally chose the option of full harmonization within the EU of the rules applicable to issuers and service providers in crypto assets, with an EU passport, over the option of an opt-in regime to obtain the EU passport with the application of national regimes. For stablecoins, the Commission has favored a tailor-made legislative regime combined with regulation under the E-Money Directive.
Related: Europe awaits implementation of regulatory framework for crypto assets
Let us take stock of the main provisions of the MiCA Regulation, which, after the trialogue among the Council, the Parliament and the Commission following the vote on March 14, should also enter into force before the end of the year and which pursues four objectives: legal certainty, support for innovation, consumer and investor protection and market integrity, and financial stability.
In addition to determining the competent authorities and their administrative sanctioning powers, as well as the anti-market abuse rules, the main provisions of the Regulation relate to the purpose and scope of the Regulation (I), the rules applicable to the issuance of utility crypto assets (II), asset-referenced tokens (III), electronic money crypto assets (IV), and the rules applicable to crypto asset service providers (V).
I. Purpose and scope of the regulation
The purpose of the regulation is to establish rules concerning:
- Transparency and disclosure requirements for the issuance and admission to trading of crypto assets.
- The authorization and supervision of crypto asset service providers, issuers of asset-based tokens and issuers of electronic money tokens.
- The operation, organization and governance of asset-based token issuers, electronic money token issuers and crypto asset service providers.
- Consumer protection rules for the issuance, trading, exchange and custody of crypto-assets.
- Measures to prevent market abuse in order to ensure the integrity of the crypto-asset markets.
The regulation applies to persons in the EU who issue crypto assets or provide services relating to crypto assets. The Regulation does not apply to:
- rypto assets that are financial instruments (equity securities issued by companies with shares, debt securities, units or shares in collective investment undertakings and financial futures contracts) or electronic money except where the latter qualifies as electronic money tokens under the Regulation.
- ertain entities or persons, such as the European Central Bank and the national central banks of the member states, insurance undertakings, a liquidator or administrator acting in insolvency proceedings, persons providing crypto asset services exclusively for their parent undertaking, their subsidiaries or other subsidiaries of their parent undertaking, the European Investment Bank, the European Investment Bank and public international organizations. Authorized credit institutions and investment firms will only be subject to certain provisions of the Regulation or will have the provisions governing them adapted.
Related: Consolidation and centralization: How Europe’s new AML regulation will affect crypto
II. Rules applicable to the issuance of crypto utilities
This category, which the Regulation calls “crypto-assets other than tokens referring to assets or electronic money tokens,” corresponds to crypto assets intended to provide digital access to a good or service, available on the DLT system, and which are only accepted by the issuer of this token (“utility tokens”). These “utility tokens” have a non-financial purpose related to the operation of a digital platform and digital services and should be considered as a special type…
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