Crypto service providers’ new friend: Markets in Crypto Assets Regulation (MiCAR) 

On 24 September 2020, the European Commission (EC) released its first proposal for the Markets in Crypto Assets Regulation (MiCAR). The proposal is part of the European Union’s Digital Finance package. This Regulation aims to regulate crypto markets within the EU and establish a European legal framework for crypto markets. In addition, the regulation should provide legal certainty for crypto assets that are currently outside European and national regulations. 

A European agreement on MiCAR was reached on the 30th of June 2022. Almost a year later, on 9 June 2023, the Regulation was published in the EU Official Journal. From 29 June 2023, the rules will enter into force in stages. What does the arrival of MiCAR mean for you? 

Entry into force and scope 

Now that the MiCA Regulation has been adopted and published in the Official Journal, the rules will enter into force in stages from 29 June 2023: 

• from 29 June 2023, the articles listed in Article 149(4) will apply; 
• from 30 June 2024, Titles III and IV of MiCA apply; and 
• from 30 December 2024, the remaining articles will apply. 

Thus, most provisions will become applicable from 30 December 2024. An exception are the requirements relating to stablecoins (referred to in MiCAR as “asset referenced tokens”, ARTs). 

Technical standards and delegated acts specifying certain elements of MiCAR will need to be adopted before the regulation becomes applicable. 

MiCAR will apply to crypto-assets currently outside European and national regulation (such as “payment tokens” and “utility tokens”) and will be relevant to issuers of crypto-assets and providers of crypto-asset-related services in the EU. 

Special focus on stablecoins 

Stablecoins (crypto-assets linked to underlying assets, often the US Dollar) enjoy special attention from governments and regulators due to their rapid growth and (potential) role in international payments. Hence, MiCAR is coming up with strict conditions for issuers of stablecoins and they will come under supervision. 

For instance, MiCAR wants to offer consumers more protection, by requiring issuers of stablecoins to build up sufficient liquid reserves and provide adequate minimum liquidity. 

Not applicable to NFTs 

It is noteworthy that the MiCA Regulation will not apply to Non Fungible Tokens (NFTs), unless the NFTs fall under existing crypto asset categories. However, the European Commission will be mandated within 18 months to conduct an assessment and, if necessary, come up with a new legislative proposal to regulate NFT

Licence instead of registration 

Currently, crypto service providers are still subject to a registration regime under the Wwft. However, after the MiCA Regulation comes into force, parties will need a licence to operate as a crypto service provider. 

Although MiCAR is stricter than the current registration regime under the Wwft, the arrival of the Regulation also offers advantages. For instance, an authorisation under the MiCA Regulation can be ‘passported’ to other EU member states – with the current registration regime, this is not possible. This offers the chance to create a bigger market for Dutch crypto service providers. 

It is therefore attractive for crypto service providers to start analysing MiCAR and start a licence application in time. Only in this way can the ideal competitive position and the ‘first mover advantage’ over other European and Dutch crypto-service providers be fully exploited. 

MiCAR and AML/Wwft 

The current anti-money laundering legislation already partly applies to some crypto service providers (exchange service providers and custody wallets). 

Nevertheless, the MiCA Regulation contains some additional anti-money laundering measures: 

The European Banking Authority (EBA) will be charged with keeping a public register of non-compliant crypto service providers. 

If the parent company of a crypto service provider that (i) is located in a country that appears on an EU list of third countries considered high-risk countries for money laundering and/or (ii) appears on the EU list of non-cooperative jurisdictions for tax purposes, the crypto service provider will have to undergo enhanced scrutiny in light of European AML legislation. 

Shareholders and directors of crypto service providers will also be subject to stricter requirements, particularly with regard to their localisation. 

ESG

The crypto asset market will have to start issuing information on its environmental and climate footprint. How this should be done will be further elaborated by ESMA. 

Thus, no decision has been made to ban crypto-assets that use the Proof of Work algorithm, even though they use huge amounts of energy. 

DORA

DORA will also apply to crypto service providers. DORA is a package of measures to promote digital innovation in the financial sector, while mitigating the resulting risks. 

Read more about DORA 

What next? 

Before MiCAR becomes applicable, many details still need to be worked out by EBA, ESMA and the EC, for instance on the authorisation process. We follow developments closely, and will be happy to keep you informed via our newsletter. 

We are also happy to help you prepare a registration or licence application and the application itself. Are you unsure whether your business activities will be covered by the MiCA Regulation? Or do you already know, but are curious about the impact such a licence will have on your current business operations? As specialists in crypto services, we would be happy to tell you more about the MiCA Regulation and its impact on your business.