Here’s what crypto asset service providers need to know about the new regulatory framework.
The Markets in Crypto Assets (MiCA) regulation, which was provisionally agreed-upon by the European Parliament on June 30, 2022, aims to protect investors and preserve financial stability, while allowing for greater innovation in the crypto asset sector. MiCA is also likely to attract operators and users to the market, as it is the first regulatory framework for crypto asset service providers (CASPs) at EU level.
What is MiCA?
MiCA is a regulatory framework for crypto assets traded on digital platforms. It covers three types of crypto assets: Utility tokens, which provide access to goods or services;- payment tokens, which are used as a means of payment or can be traded for other MiCA-regulated tokens; and e-money tokens, which are backed by fiat currencies and used to make electronic payments.
What does MiCA do?
MiCA has established rules for the issuance, admission to trading, and operation of crypto assets, as well as requirements for the providers of crypto asset services. The European Blockchain Partnership (EBP) has been set up to specifically promote cooperation between member states on blockchain technology.
What are the benefits of MiCA?
MiCA has a number of benefits, including better regulatory clarity for CASPs in the EU, improved investor protection, enhanced financial stability, and the promotion of innovation. MiCA will also make it easier for member states to cooperate on blockchain technology, as the EBP will provide a forum for discussion and exchange of best practices.
Who will MiCA impact?
MiCA will impact all CASPs offering services to clients in the EU. This includes exchanges, custodian wallet providers, issuers of initial coin offerings (ICOs) and other CASPs. MiCA will not apply to persons who buy or sell crypto assets for their own account.
What does this mean for non-European crypto service providers?
MiCA will not apply to non-European crypto service providers unless they target EU investors or offer their services in the EU. However, national competent authorities in the EU may require non-European crypto service providers to obtain a MiCA authorization if they provide cross-border services into the EU.
The MiCA regulation is a welcome development for the crypto industry as it brings more clarity to the regulatory landscape and protects investors from financial losses.
How will MiCA play into AML regulation?
MiCA will complement the EU’s existing Anti-Money Laundering Directive (AMLD) by providing a specific regulatory framework for crypto-assets. MiCA will require CASPs to put in place AML measures, such as Customer Due Diligence and reporting of suspicious transactions. MiCA will also allow national competent authorities to exchange information on suspected money laundering or terrorist financing activities involving crypto assets.
The MiCA regulation is a welcome development for the crypto industry as it brings more clarity to the regulatory landscape and protects investors from financial losses. However, CASPs will need to ensure that they comply with MiCA’s rules and requirements when they come into effect.
When will MiCA come into effect?
The MiCA regulation is still subject to approval by the European Parliament and the European Council. The European Commission will also need to implement further acts to specify certain technical requirements for MiCA-regulated activities. MiCA is expected to come into effect by 2024.
CASPs are recommended to stay up to date with MiCA, and consult with a legal advisor to ensure they remain compliant.
Other interesting crypto reads
Want to learn more about the regulation of crypto assets, then check out our following articles:
- Buying Crypto without KYC? An immense risk for both users and platform operators
- The German crypto license – what you need to know if you want to service Germany
- Fintech Spotlight Interview with Brandi Reynolds, CAMS-Audit, CCI, CCCE at Bates Group
- EU agrees on monitoring of crypto payments with Transfer of Funds Regulation (TFR)
Or visit our crypto industry page to learn more about KYC solutions for crypto service providers
Head of Marketing, Digital Identity at IDnow
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