Markets in Crypto-Assets (MiCA) Regulation

Markets in Crypto-Assets, or short MiCA, is new planned regulation that is part of the EU Digital Finance Package.

Expected application date: somewhere in 2023-2024

Summary

Please refer to MiCA: Regulating provision of services in crypto-assets (Norton Rose Fulbright) for a succint analysis of this proposed regulation.

(...) MiCA has four main objectives:

1/ Ensuring legal certainty for crypto-assets
2/ Supporting innovation and fair competition
3/ Protecting consumers, investors and market integrity
4/ Ensuring financial stability, with the inclusion of safeguards

and will be targeting the following types of "providers of services in crypto-assets, that are not financial instruments under MiFID II":

1/ The custody and administration of crypto-assets on behalf of third parties
2/ The operation of trading platforms for crypto-assets
3/ The exchange of crypto-assets for fiat currency that is a legal tender
4/ The exchange of crypto-assets for other crypto-assets
5/ The execution of orders in crypto-assets on behalf of third parties placing crypto-assets
6/ The reception and transmission of orders for crypto-assets on behalf of third parties
7/ The provision of advice on crypto-assets
(...)

(source: Norton Rose Fulbrigth)

Overview

MiCA proposes (more or less) the following set of rules:

Subject Matter, Scope and Definitions

Crypto-Assets, other than asset-referenced tokens or e-money tokens

• Offers of crypto-assets, other than asset-referenced tokens or e-money tokens, to the public, and admission of such crypto-assets to trading on a trading platform for crypto-assets
• Content and form of the crypto-asset white paper
• Marketing communications
• Notification of the crypto-asset white paper, and, where applicable, of the marketing communications
• Publication of the crypto-asset white paper, and, where applicable, of the marketing communications
• Offers to the public of crypto-assets, other than asset-referenced tokens or e-money tokens, that are limited in time
• Permission to offer crypto-assets, other than asset-referenced tokens or e-money tokens, to the public or to seek admission for trading such crypto-assets on a trading platform for crypto-assets
• Modification of published crypto-asset white papers and, where applicable, published marketing communications after their publication
• Right of withdrawal
• Obligations of issuers of crypto-assets, other than asset-referenced tokens or e-money tokens
• Liability of issuers of crypto-assets, other than asset-referenced tokens or e-money tokens for the information given in a crypto-asset white paper

Asset-referenced tokens

Authorisation to offer asset-referenced tokens to the public and to seek their admission to trading on a trading platform for crypto-assets

• Authorisation
• Application for authorisation
• Content and form of the crypto-asset white paper for asset-referenced tokens
• Assessment of the application for authorisation
• Grant or refusal of the authorisation
• Withdrawal of the authorisation
• Modification of published crypto-asset white papers for asset-referenced tokens
• Liability of issuers of asset-referenced tokens for the information given in a crypto-asset white paper

Obligations of all issuers of asset-referenced tokens

• Obligation to act honestly, fairly and professionally in the best interest of the holders of asset-referenced tokens
• Publication of the crypto-asset white paper, and, where applicable, of the marketing communications
• Marketing communications 
• Ongoing information to holders of asset-referenced tokens
• Reporting obligations to ESMA
• Complaint handling procedure
• Prevention, identification, management and disclosure of conflicts of interest
• Information to competent authorities
• Governance arrangements
• Own funds requirements

Reserve of assets

• Obligation to have reserve assets, and composition and management of such reserve of assets
• Custody of reserve assets
• Investment of the reserve assets
• Rights on issuers of asset-referenced tokens or on the reserve assets
• Prohibition of interest

Acquisitions of issuers of asset-referenced tokens

• Assessment of intended acquisitions of issuers of asset-referenced tokens
• Content of the assessment of intended acquisitions of issuers of asset-referenced tokens

Significant asset-referenced tokens

• Classification of asset-referenced tokens as significant asset-referenced tokens
• Voluntary classification of asset-referenced tokens as significant asset-referenced tokens
• Quasi e-money tokens and payment asset-referenced tokens
• Specific additional obligations for issuers of significant asset-referenced tokens

Orderly wind-down

Electronic money tokens

Requirements to be fulfilled by all issuers of electronic money tokens

• Authorisation
• Issuance and redeemability of electronic money tokens
• Prohibition of interests
• Content and form of the crypto-asset white paper for electronic money tokens
• Liability of issuers of e-money tokens for the information given in a crypto-asset white paper
•  Marketing communications 
• Investment of funds received in exchange of e-money token issuers

Significant e-money tokens

• Classification of e-money tokens as significant e-money tokens
• Voluntary classification of e-money tokens as significant e-money tokens
• Specific additional obligations for issuers of significant e-money tokens

Authorisation and operating conditions for Crypto-Asset Service providers

Authorisation of crypto-asset service providers

• Authorisation
• Application for authorisation
• Assessment of the application for authorisation and grant or refusal of authorisation
• Withdrawal of authorisation
• Provision of crypto-asset services at the own exclusive initiative of the client
• Register of crypto-asset service providers
• Cross-border provision of crypto-asset services

Obligation for all crypto-asset service providers

• Obligation to act honestly, fairly and professionally in the best interest of clients and information to clients
• Prudential requirements
• Organisational requirements
• Know-your-customer policy
• ESMA register of non-compliant crypto-assets service providers
• Information to competent authorities
• Safekeeping of clients’ crypto-assets and funds
• Complaint handling procedure
• Prevention, identification, management and disclosure of conflicts of interest
• Outsourcing
• Orderly wind-down of providers

Obligations for the provision of specific crypto-asset services

• Custody and administration of crypto-assets on behalf of third parties
• Operation of a trading platform for crypto-assets
• Exchange of crypto-assets against fiat currency or exchange of crypto-assets against other crypto-assets
• Execution of orders for crypto-assets on behalf of third parties
• Placing of crypto-assets
• Reception and transmission of orders on behalf of third parties
• Advice on crypto-assets

Acquisition of crypto-asset service providers

• Assessment of intended acquisitions of crypto-asset service providers
• Content of the assessment of intended acquisitions of crypto-asset service providers

Prevention of Market Abuse involving crypto-assets

No more rug pulls? 😂

• Scope of the rules on market abuse
• Disclosure of inside information
• Prohibition of insider dealing
• Prohibition of unlawful disclosure of inside information
• Prohibition of market manipulation

Competent Authorities, the EBA and ESMA

Powers of competent authorities and cooperation between competent authorities, the EBA and ESMA

• Competent authorities
• Powers of competent authorities
• Cooperation between competent authorities
• Cooperation with the EBA and ESMA
• Cooperation with other authorities
• Notification duties
• Professional secrecy
• Data protection
• Precautionary measures
• Cooperation with third countries
• Complaint handling by competent authorities

Administrative measures and sanctions by competent authorities

• Administrative sanctions and other administrative measures
• Exercise of supervisory powers and powers to impose penalties
• Right of appeal
• Publication of decisions
• Reporting of penalties and administrative measures to ESMA and EBA
• Reporting of breaches and protection of reporting persons
• Supervisory responsibilities of ESMA on issuers of significant asset-referenced tokens
• Supervisory responsibilities of the EBA on issuers of significant e-money tokens
• Colleges for issuers of significant asset-referenced tokens
• Non-binding opinions of the colleges for issuers of significant asset-referenced tokens
• College for issuers of significant electronic money tokens
• Non-binding opinions of the college for issuers of significant electronic money tokens

ESMA’s powers and competences on issuers of significant asset-referenced tokens and EBA’s powers and competences on issuers of significant e-money tokens

• Exercise of powers referred to in Articles 104 to 107
• Request for information in order to carry out its duties under Article 98 by ESMA regarding asset-referenced tokens 
• Request for information by the EBA regarding e-money tokens
• General investigative powers
• On-site inspections
• Exchange of information
• Administrative agreements on exchange of information between ESMA and the EBA and third countries
• Disclosure of information from third countries
• Cooperation with other authorities
• Professional secrecy
• Supervisory measures by ESMA and EBA
• Fines
• Periodic penalty payments
• Disclosure, nature, enforcement and allocation of fines and periodic penalty payments
• Procedural rules for taking supervisory measures and imposing fines
• Hearing of persons concerned
• Review by the Court of Justice
• Supervisory fees
• Delegation of tasks by ESMA and EBA to competent authorities
• etcetera!

Additional reading

• • For the curious, here you can find the latest version (including -very interesting- amendments): DRAFT EUROPEAN PARLIAMENT LEGISLATIVE RESOLUTION on the proposal for a regulation of the European Parliament and of the Council on markets in crypto-assets and amending Directive (EU) 2019/1937
  • For the banking enthusiasts: Opinion of the European Central Bank of 19 February 2021 on a proposal for a regulation on Markets in Crypto-assets, and amending Directive (EU) 2019/1937 (CON/2021/4) 2021/C 152/01
  • For the privacy enthusiasts: European Data Protection Supervisor (EDPS) Opinion on the Proposal for a Regulation on Markets in Crypto-assets, and amending Directive (EU) 2019/1937 
  • Yet another summary, this time by BNP Paribas Corporate & Institutional Banking: MiCA – Markets in Crypto-Assets regulation memo  
  • Bankless also did an episode on MiCA:

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