European crypto-assets regulation (MiCA)

SUMMARY OF:

Regulation (EU) 2023/1114 on markets in crypto-assets (MiCA)

WHAT IS THE AIM OF THE REGULATION?

It establishes uniform rules for issuers of crypto-assets that have so far not been regulated by other European Union (EU) financial services acts and for providers of services in relation to such crypto-assets (crypto-asset service providers).

The rules cover:

transparency and disclosure requirements for the issuing, offering to the public and admitting of crypto-assets to a trading platform;
the authorisation and supervision of crypto-asset service providers and issuers of asset-referenced and electronic money tokens;
the operation, organisation and governance of the issuers and crypto-asset service providers;
protection for holders of crypto-assets and clients of service providers;
measures to prevent insider dealing, unlawful disclosure of inside information and market manipulation.

KEY POINTS

The regulation applies to the issuing, offering to the public and admission to trading of crypto-assets, and provision of services in relation to crypto-assets.

It distinguishes the following types of crypto-assets:

e-money tokens (crypto-assets that stabilise their value in relation to a single official currency);
asset-referenced tokens (crypto-assets that stabilise their value in relation to other assets or a basket of assets);
crypto-assets other than asset-referenced tokens or e-money tokens.

Offerors* or persons seeking admission to trading of crypto-assets other than asset-referenced tokens and e-money tokens must:

be a legal person*;
publish a crypto-asset white paper and any marketing communication on their website;
act honestly, fairly and professionally;
communicate with actual and potential asset holders in a fair, clear and non-misleading manner;
identify, prevent, manage and disclose any conflicts of interest;
be liable for damages for incorrect information in the white paper;
provide holders of crypto-assets with a right of withdrawal.

Issuers of asset-referenced tokens that offer them to the public or seek their admission to trading on a trading platform for crypto-assets must:

be a legal person or a certain undertaking based in the EU;
have authorisation from their home EU Member State; or
be a credit institution which produces a crypto-asset white paper that is approved by the competent national authority;
redeem their asset-referenced tokens at any time upon request of the holders at market value of the referenced assets or by delivering the referenced assets;
publish a crypto-asset white paper and any marketing communication on their website and be liable for damages for incorrect information in the white paper;
act honestly, fairly and professionally;
communicate with actual and potential holders of the tokens in a fair, clear and non-misleading manner;
act in the best interests of the holders of the tokens and treat them equally;
establish and maintain effective and transparent procedures for handling complaints promptly, fairly and consistently;
identify, prevent, manage and disclose any conflicts of interest;
maintain at all times a reserve of assets covering the liabilities towards the holders of the tokens, and have own funds at least equal to the highest of the following:
- €350,000,
- 2% of the average amount of the reserve assets,
- a quarter of the fixed overheads of the preceding year;
establish recovery and redemption plans for use if they are unable to meet their obligations.

Issuers of electronic money tokens that offer them to the public or seek their admission to trading on a trading platform for crypto-assets must:

be authorised as a credit or electronic money institution;
publish a crypto-asset white paper and any marketing communication on their website and be liable for damages for incorrect information in the white paper;
comply with issuance, redeemability and marketing rules;
issue the tokens at par value on receipt of funds;
redeem upon a holder's request the tokens at any moment and at par value;
invest the funds they receive in secure, low-risk assets in the same currency and deposit them in a separate account in a credit institution;
establish recovery and redemption plans for use if they are unable to meet their obligations.

The European Banking Authority (EBA) classifies asset-referenced and electronic money tokens as ‘significant’ if certain criteria are met, such as their holders, value or transactions going above certain levels. In such cases, issuers of such significant asset-referenced tokens and electronic money tokens are subject to additional requirements and the EBA takes over the supervisory role.

Crypto-asset service providers must be:

a legal person or certain undertaking authorised by their national authority as a crypto-asset service provider, with a registered office in a Member State where they carry out at least part of their services, effective management and at least one of the directors in the EU; or
under certain conditions a credit institution, central securities depository, investment firm market operator, e-money institution, management company of the undertakings for the collective investment in transferable securities or alternative investment fund.

Obligations for all crypto-asset providers require them to:

act honestly, fairly and professionally in their actual and potential clients’ best interests;
provide clients with fair, clear and non-misleading information;
not deliberately or negligently mislead clients on the real or perceived advantages of crypto-assets, and warn them of the risks involved;
make their pricing, costs, fee policies, and climate and environment-related impact of each crypto-asset prominently available on their website;
have in place prudential safeguards at least equal to the higher of the following:
- the permanent minimum capital requirements in Annex IV, or
- one quarter of the preceding year’s fixed overheads;
ensure members of the management body are of good repute and have the knowledge, experience, skills and time to perform their duties effectively;
implement policies and procedures to prevent any money laundering, terrorist financing or other offences;
keep clients’ crypto-assets and funds separate from other assets and not use them on their own account;
establish and maintain effective and transparent procedures to handle clients’ complaints promptly, fairly and consistently;
maintain and operate an effective policy to identify, prevent, manage and disclose conflicts of interest;
take all reasonable steps to avoid any risk when outsourcing activities;
devise a plan for an orderly wind-down of their activities if necessary.

Specific rules cover:

takeovers of issuers of asset-referenced tokens and crypto-asset service providers;
measures to prevent and ban market abuse, such as insider dealing and misuse of insider information;
powers and roles of national authorities, the EBA and the European Securities and Markets Authority.

The regulation does not apply to:

crypto-assets that are covered by other EU financial services acts (e.g. those that qualify as financial instruments, pensions or insurance products);
providers of crypto-asset services exclusively for their parent companies or subsidiaries, liquidators and administrators in insolvency proceedings;
the European Central Bank and national central banks, the European Investment Bank, the European Financial Stabilisation Mechanism, the European Stability Mechanism and public international organisations;
crypto-assets that are unique and not interchangeable (‘fungible’) with others.

The European Commission presents a report to the European Parliament and the Council of the European Union at various stages once the regulation applies, on:

latest developments on crypto-assets (after 18 months);
interim assessment of the regulation (after 24 months);
application of the regulation (after 48 months).

The Commission also has the power to adopt delegated and implementing acts.

The European Securities and Markets Authority, in cooperation with the EBA, submits a publicly available report to the Parliament and the Council, 12 months after the regulation enters into force and every year thereafter, on the application of the legislation and developments in crypto-asset markets.

The regulation amends:

Directive 2013/36/EU (capital requirements);
Directive (EU) 2019/1937 (protection of persons who report breaches of EU law);
Regulation (EU) No 1093/2010 (establishing the EBA);
Regulation (EU) No 1095/2010 (establishing the European Securities and Markets Authority).

FROM WHEN DOES THE REGULATION APPLY?

It applies from 30 December 2024. However, rules on asset-referenced tokens (Title III) and e-money tokens (Title IV) apply from 30 June 2024.

BACKGROUND

The legislation is designed to provide legal clarity and certainty for crypto-asset issuers and providers. It aims to boost innovation while preserving financial stability and protecting investors from risks.
It is part of the digital finance package adopted by the Commission in September 2020. This strengthens the EU’s anti-money-laundering and countering terrorism-financing rules, including rules on information accompanying money transfers.

KEY TERMS

Offeror. A natural or legal person, or other undertaking, or the issuer, who offers crypto-assets to the public.

Legal person. An individual, company or any other legal entity that has legal rights and obligations.

MAIN DOCUMENT

Regulation (EU) 2023/1114 of the European Parliament and of the Council of 31 May 2023 on markets in crypto-assets, and amending Regulations (EU) No 1093/2010 and (EU) No 1095/2010 and Directives 2013/36/EU and (EU) 2019/1937 (OJ L 150, 9.6.2023, pp. 40–205).