MiCa: The essentials

After entering into force on June 30, 2023, Regulation (EU) 2023/1114 of the European Parliament and of the Council of 31 May 2023 on markets in crypto-assets (hereinafter the “Regulation”) is mandatory from December 30, 2024. The Regulation significantly changes the crypto market in the EU and thus affects international crypto markets.
The Regulation is quite extensive and has caused a stir in the European crypto community: the new rules could/might remove certain crypto coins and even crypto market participants from the EU crypto market.

Let us present some of the basic rules of the regulation.

The objective of the Regulation is to ensure transparency, stability and investor protection in the EU crypto market by regulating cryptocurrencies and digital assets (English: “Markets in Crypto-Assets” (abbreviated: “MICA”).

Cryptoassets (coins) are classified as:
1. ‘Electronic money token’ or ‘e-money token’ (Stablecoins) means a type of crypto-asset that purports to maintain a stable value by referencing the value of one official currency. These crypto assets are electronic substitutes for coins and banknotes. They are equivalent to electronic money within the meaning of Directive 2009/110/EC of the European Parliament and of the Council of 16 September 2009 on the taking up, pursuit and prudential supervision of the business of electronic money institutions amending Directives 2005/60/EC and 2006/48/EC and repealing Directive 2000/46/EC.

2. Asset-referenced token means a type of crypto-asset that is not an electronic money token and that purports to maintain a stable value by referencing another value or right or a combination thereof, including one or more official currencies.

3. Utility tokens is a comprehensive category of cryptoassets other than asset-referenced tokens and stablecoins that covers a wide range of cryptoassets, including utility tokens. This type of crypto-asset that is only intended to provide access to a good or a service supplied by its issuer;

Mandatory authorization for service providers in MICA (exchanges, wallets, platforms): all companies providing services in the field of cryptoassets will have to undergo a licensing procedure.

A new licensing (authorization) system will be introduced: all VASP license holders will have to apply for and obtain a new MiCA CASP license, the requirements for which will be stricter and more complex (requirements for authorized capital, etc.) than for the VASP license. The MiCA CASP license is valid throughout the EU and therefore has uniform rules and requirements for the entire EU, thus eliminating the previously existing national differences in licensing. The deadline for obtaining a MiCA CASP license is July 2025, but may vary between EU member states. Therefore, it is expected that not all EU cryptocurrency market participants will remain in this market.

No license is required if the crypto-asset service is offered free of charge or can only be used within a restricted network (i.e., a restricted network exemption), or if crypto-asset offers are made to fewer than 150 persons in each EU Member State, are addressed exclusively to qualified investors, or the total consideration does not exceed EUR 1 million in any 12-month period.

Under Regulation, crypto-asset service providers must have a registered office in an EU member state. Therefore, crypto asset service providers must:
– have the place of effective management in the EU and have at least one director resident in the EU; OR
– establish an entity (e.g. a subsidiary) within the EU and that entity must apply for a CASP license from the competent national authority.
An exception to this rule is the situation where an EU client, on its own initiative, initiates the provision of a service or activity in crypto assets by a third country company (there are exceptions and rules).

The need to take AML and KYC measures: Participants in the crypto market should take measures to identify customers and combat money laundering.

The following crypto assets are not subject to the regulation:
– Financial instruments (as defined in the second Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (MiFID II)), which are already subject to existing financial services legislation. In order to better define and classify crypto assets, the the European Securities and Markets Authority (ESMA) has issued the Final Reoprt Guidelines on the conditions and criteria for the qualification of cryptoassets as financial instruments, which can be used to determine whether a crypto asset is subject to the Regulation (MiCa) or the MiFID II.
– Non-fungible tokens (NFTs), including digital art and collectibles (with some exceptions).

The regulation of the crypto market in the EU has many nuances, so we recommend that you seek professional assistance from lawyers for advice and assistance with transactions and licensing.

MiCa: The essentials

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