What is MiCA?
June 13th, 2023
Last week (April 20/21 2023) the European Parliament passed the MiCA regulation with an overwhelming majority. In this article, I will cover the details and facts about it.
Update
May 2023
The EU’s Council gave the Markets in Crypto Assets regulation its final approval.
The Council has also agreed on new rules that will make crypto service providers to tell tax officials about their customers’ holdings.
As Europe goes forward with its digital change, it is hoped that the tax rules will help national governments collect taxes more quickly and keep up with changing technology.
June 2023
The new tax rules are called DAC8.
You can find an new article about it over here:
tl;dr
- The European Union Parliament voted on the MiCA regulation, which legally defines the crypto market in Europe.
- MiCA aims to improve legal certainty and investor protection. Companies will have 18 months to comply with it after its introduction in Q3 of 2024.
- The goal is to regulate those who issue crypto-assets and provide crypto-asset services.
- Crypto assets are a new type of digital asset that can be securely transferred and stored. They have to release a white paper that includes important information about the issuer, characteristics, risks, and other relevant details.
- NFTs, Defi and CBDC are not included in the regulation so far.
Over the past few months, the crypto market scandals have affected investor trust.
There will soon be more legal certainty in Europe.
The EU Parliament planned to vote on the MiCA regulation in Jan 2023.
Because of translation issues, the decision was delayed until April 2023. The European Parliament is now legally defining the crypto market.
What is MiCA?
MiCA is a regulation introduced by the EU in 2022 to improve legal certainty and investor protection in the markets for certain crypto in the EU. It sets uniform regulations for these assets.
Companies will need to comply with it within 18 months of its introduction.
That means it will start in Q3 of 2024.
The regulations aim to protect investors and promote the use of crypto by creating uniformity across the EU. Companies affected will have new obligations and accounting practices to follow.
The set of rules is called 2020/0265(COD), and you can have a look at the paper in this link.
MiCA is a regulation that defines crypto-assets as digital representations of value or rights that can be transferred and stored electronically using distributed ledger technology or similar technology.
The aim is to create standards for those who issue crypto-assets, and CASPs. (crypto-asset service providers).
There are three sub-categories of crypto-assets:
- ARTs = asset-referenced token = stablecoin
- EMTs = e-money tokens
- other crypto-assets = utility token and other cryptos like Bitcoin or Ethereum
MiCA creates three sets of regulations for stablecoin issuers, non-stablecoin issuers, and crypto-asset service providers.
Regulation details:
A new crypto asset will be a digital representation of value or rights which can be transferred and securely stored in digital form.
MiCA requires issuers of crypto-assets to publish a white paper with details of the issuer, characteristics, project timelines, risks, and other matters. It also establishes disclosure, transparency, and governance requirements for crypto-assets other than ARTs and EMTs. EMTs may only be offered or listed by allowed credit institutions or e-money institutions.
An application for permit of an ART issuer requires a program of operations, initial capital, governance arrangements, legal opinion, crypto-asset white paper, policies and procedures.
MiCA establishes general and service specific rules for Crypto-Asset Service Providers (CASPs). It introduces 10 categories of crypto-asset services that require a licence and pass porting rights. AIFMs, UCITS management companies, MiFID firms, credit institutions and electronic money institutions must notify the national regulator at least 40 days before providing the crypto-asset service.NFTs are not covered unless they meet some certain criteria and are reclassified as crypto-assets.
Also, Defi and CBDC are not included in the regulation so far.
