European crypto-assets regulation (MiCA)

KEY POINTS

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

Offerors¹ or persons seeking admission to trading of crypto-assets other than asset-referenced tokens and e-money tokens must:

• be a legal person²;
• 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 that 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 e-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 e-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 e-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 e-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 and fee policies, and the 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 (ESMA).

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 with others.

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

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

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

ESMA, in cooperation with the EBA, submits a publicly available report to the Parliament and to 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.

European single access point

Amending Regulation (EU) 2023/2869 incorporates within Regulation (EU) 2023/1114 a new article concerning the accessibility of information on the European single access point (ESAP), established under Regulation (EU) 2023/2859 (see summary). The ESAP will provide access to public financial and sustainability-related information about EU companies and EU investment products. From 10 January 2030, when making public any information required under Regulation (EU) 2023/1114, the amending act requires the issuer, offeror or person seeking admission to trading to submit that information at the same time to the relevant collection body for the purpose of making it accessible on the ESAP. The amending regulation also sets out the conditions with which that information must comply.

Regulation (EU) 2023/1114 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 ESMA).