MiCA Regulation: Embarking on a new era for Crypto-Assets & CASPSalvus Team
The adoption of the Markets in Crypto-Assets (MiCA) Regulation by the European Council (EC) marks a momentous milestone in establishing a pioneering legal framework for crypto-assets at the EU level. MiCA is designed to protect investors, enhance transparency, and establish a comprehensive set of compliance rules for both issuers and service providers in the crypto-asset industry.
The MiCA Regulation introduces harmonized regulatory obligations for the issuance and offering of crypto-assets, and the operation of crypto-asset service providers (CASP) established in the EU. As a result, national legislation implemented by EU Member States on an individual basis will be repealed and replaced by MiCA.
Throughout this article, the SALVUS Crypto-Assets team examines important aspects of MiCA Regulation coming into force, and discusses key benefits of the harmonized framework, as follows:
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1. The chronology of MiCA
The need for the design and development of a legal framework that will cover cryptocurrencies within the EU was created due to the public’s increased interest in crypto-assets during the year 2018. In September 2020, the MiCA proposal was adopted by the European Commission. Following a series of discussions and opinions shared between the EU preparatory bodies and committees, the final edition of MiCA was approved by the EU Parliament in October 2022.
On the 20th of April 2023, and after being translated into the 24 EU official languages, the final vote on MiCA was performed by the European Parliament. The final vote was followed by the regulation’s formal adoption by the European Council on the 16th of May 2023. MiCA Regulation shall come into force twenty days after its publication in the official journal of the EU.
The date that MiCA Regulation comes into force notifies the beginning of its transitional period. This period shall serve as an implementation window for crypto-assets currently in circulation and established CASP to pursue full compliance with provisions of MiCA.
The length of the transitional period varies between the regulatory obligations needed to be fulfilled and the status of authorization held by each CASP. More importantly, the length of the said period depends on the extent to which the national legislation of each member state is aligned with MiCA.
2. Unlocking the MiCA benefits
The harmonized legal framework of MiCA is based on the principles of the Markets in Financial Instruments Directive (MiFID) II. This framework aims to provide retail holders with a high level of protection, safeguard the integrity of crypto-asset markets, and simultaneously foster innovation and fair competition.
Furthermore, it will enable CASP-licensed entities to broaden their business on a cross-border basis and provide them with access to banking services, enhancing the smooth running of crypto-business.
This proportionate treatment of issuers and CASP-licensed entities is expected to offer equal opportunities for participants to enter the market and for future development. MiCA will replace relevant frameworks developed on a national level by EU Member States with uniform provisions, eliminating legal complexity and regulatory uncertainty.
3. Three key provisions of MiCA
MiCA Regulation consists of 149 Articles divided between the following main titles:
- Subject matter, scope and definitions
- Crypto-assets other than asset-referenced tokens or e-money tokens
- Asset-referenced tokens
- E-money tokens
- Authorization and operating conditions for crypto-asset service providers
- Prevention and prohibition of market abuse involving crypto-assets
- Competent authorities, EBA and ESMA
- Delegated Acts
- Transitional and final provisions
A uniform obligation for every type of crypto-assets subject to MiCA, requires persons seeking to issue, offer or admit crypto-assets into trading to prepare and publish a crypto-asset white paper. The said paper shall provide a predetermined set of information in a concise and comprehensible form and remain available for existing and potential holders.
Provisions applicable only to asset-referenced tokens include the obligation to always maintain a reserve of assets, separated from their estate and the reserve of assets of other tokens. This reserve serves as a safeguard for claims raised towards the issuer of the asset-referenced token.
In the context of MiCA, CASP entities are required to have in place prudential safeguards. This shall be at least equal to the higher of the amount of permanent minimum capital requirements or 25% of the fixed overheads of the preceding year. To this end, permanent minimum capital requirements depend on the set of crypto-asset services offered by each CASP.
It is worth noting that CASP established in Cyprus and registered with the Cyprus Securities and Exchange Commission (CySEC) are already subject to prudential requirements. In this respect, the CySEC CASP regime is considered to be more aligned with MiCA Regulation, compared to regimes of other member states in which registration occurs through the financial intelligence units.
In conclusion to this article, we consider MiCA Regulation to have the same importance for crypto-assets and crypto-asset services as MiFID II has for financial instruments and investment activities. This is because crypto-assets are a relatively new type of assets highly dependent on their underlying technology, but rapidly embraced by both retail and professional investors.
For that purpose, professionals employed in Crypto-Asset Service Providers (CASP) as well as other entities regulated by CySEC or the Central Bank of Cyprus (CBC) are required to remain informed of the regulatory developments in the crypto-asset industry and be prepared for the compliance requirements to come into force.
Continuing its collaboration with the Institute for Professional Excellence (IforPE), SALVUS Funds has developed a self-study course titled – MiCA Regulation in 2023. The course aims to provide professionals with an understanding of the essential characteristics of crypto-assets and educate them on the regulatory obligations of issuers, offerors and CASP regulated entities. In addition, the course concludes with an overview of the Anti-Money Laundering (AML) framework that complements MiCA Regulation and designates CASP as obliged entities.
The SALVUS Crypto-Assets team can support new and existing CASP to be successfully registered under the CySEC CASP regime. Through our first-hand experience, we assist you with the development of the policies and procedures required by the regulator for the CASP registration.
Once your CASP registration is successfully completed, our Regulatory Compliance team can assist you in activating your license and meeting all your regulatory and reporting obligations. Our post-registration services encompass the development and implementation of policies and procedures following the MiCA requirements. This will facilitate your transition from being registered with CySEC to obtaining a MiCA license as a CASP.
Please contact us at firstname.lastname@example.org or call us at +357 7000 7898 if you require support with your CASP registration and regulatory obligations or if you have any questions about our 2023 MiCA Regulation course with IforPE.
Should you be interested to read more about MiCA, CySEC CASP and Market Abuse Regulation, please visit the selected articles below:
- Establishing a CASP in Cyprus in 2023
- CySEC CASP and the path to MiCA
- How to comply with the Market Abuse Regulation (MAR)
The information provided in this article is for general information purposes only. You should always seek professional advice suitable to your needs.