Insights Blog

The European Parliament gave its final approval to MiCA last week, paving the way for its publication in the Official Journal (expected sometime in June or July 2023).

As mentioned in our previous update, MiCA ‘s aim is to bring about EU-wide clarity, cohesion and investor protection, and ensure financial stability, by requiring crypto-asset service providers (CASPs) to be authorised in order to operate within the EU.  CASPs authorised under MiCA will then be able to passport their services EU-wide. MiCA will not, however, prevent an EU person from receiving, on its own initiative, crypto-asset services from third country providers.

Public offers, and admissions to trading, of crypto-assets will (subject to certain exceptions) be subject to transparency, disclosure and notification requirements, including the obligation to publish a ‘white paper’.

Stablecoins are a particular focus of MiCA: issuers of stablecoins will be subject to liquidity requirements and will need an EU presence. All stablecoins will be subject to supervision by the European Banking Authority.

MiCA will not apply to crypto-assets that are already subject to existing EU financial services regulation (e.g. if they constitute a MiFID financial instrument, a structured deposit, a securitisation position etc.)  ESMA has been mandated to prepare guidelines which clearly delineate between crypto-assets covered by MiCA, and financial instruments, to ensure clarity for stakeholders. Lending and borrowing crypto-assets are also outside of MiCA’s scope, as are crypto-assets which cannot be transferred from one holder to another.

As with most key areas of EU financial services legislation, MiCA mandates sustainability-related disclosures in respect of the principal adverse impacts on the climate and other environment-related adverse impacts of the consensus mechanism used to issue the crypto-asset.  A bespoke market abuse framework has also been included within MiCA in respect of crypto-assets that are admitted to trading.

For the time being, unique non-fungible tokens (NFTs) are out-of-scope, but the European Commission will look at this again in late 2024 to see if an NFT-related regime is warranted based on market developments between now and then.

Timing: MiCA will apply 18 months after it is published in the Official Journal (save for the provisions in respect of stablecoins, which will apply 6 months earlier).

The Parliament gave final approval to the recast regulation on information accompanying transfers of funds at the same time.  That recast regulation will capture transfers of crypto-assets, and forms part of the Commission’s AML Action Plan.  CASPs will be required to collect, and make accessible, certain information about the originator and the beneficiary of crypto-asset transfers operated by them to ensure traceability (known as the travel rule). CASPs will also be required to implement related appropriate internal policies, procedures and controls.  There are limited exclusions, such as person-to-person transfers conducted without a CASP, or between CASPs acting on their own behalf.  Ultimately, CASPs will become obliged entities for AML/CFT purposes.

The recast regulation will come into force on the same date as MiCA (i.e. 18 months after publication in the Official Journal).