Markets in Crypto-Assets (MiCA) Regulation
The Markets in Crypto-Assets (MiCA) Regulation will introduce a new regulatory framework for European crypto-assets. Critically, MiCA aims to protect investors and ensure financial stability while allowing innovation and fostering the attractiveness of the crypto-asset sector.
Issuers of Asset Reference Tokens (ARTs) and E-Money Tokens (EMTs)
MiCA will bring issuers of certain types of crypto-assets into the regulatory framework. Specifically, MiCA will establish new rules for stablecoins including Asset-Referenced Tokens (ARTs), E-Money Tokens (EMTs) and utility tokens. MiCA distinguishes stablecoins by defining ARTs as being linked to multiple currencies, commodities or crypto currencies and EMTs as being linked to a single currency. Utility tokens are intended to provide access to a good or service that will be supplied by the issuer of that token.
Issuers of ARTs and EMTs will be required to be authorised by the Central Bank of Ireland (the Central Bank) and to publish a white paper which will contain information for investors; they will also be required to build up a sufficiently liquid reserve with a 1/1 ratio and meet other regulatory requirements. The European Banking Authority (EBA) will have supervisory responsibilities for issuers of significant ARTs and EMTs.
Crypto-Asset Service Providers (CASPs)
Under the provisional agreement, CASPs shall require authorisation in order to operate within the EU. Crypto-assets services include the operation of a trading platform, custody and administration of crypto-assets on behalf of third parties, the exchange of crypto-assets for funds/other crypto-assets, the execution of orders for crypto-assets, the placing of crypto-assets, providing transfer services for crypto -assets to third parties, providing advice on crypto- assets and portfolio management on crypto- assets. At a high level, CASPs that provide crypto-asset services to third parties (e.g. consumers) on a professional basis will be subject to new rules including governance and liquidity requirements.
Market Abuse
MiCA also introduces new rules that prohibit market abuse related to any type of crypto-asset transaction or service, including unlawful disclosure of inside information, insider trading and actions that are likely to lead to disruption or manipulation of crypto-assets.
Finalisation of MiCA
MiCA is currently progressing through the EU legislative process and is expected to be finalised in the coming months. Thereafter MiCA will be in effect across the EU and will ensure the operation of a harmonised EU-wide crypto-asset regulatory framework:
- MiCA is expected to become applicable for issuers of ARTs and issuers of EMTs 12 months after it enters into force;
- MiCA is expected to become applicable for issuers of utility tokens and CASPs 18 months after it enters into force; and
- A transition period is provided for CASPs operating within national law prior to the date of application (18 months after entry into force) to continue to operate for up to 18 months or until authorisation has been granted, whichever is sooner.
The European Supervisory Authorities (ESAs) will soon start developing texts that will provide greater granularity on the provisions in MiCA. Thereafter, the ESAs will consult with stakeholders on those proposed texts. Interested parties should follow these developments and start to assess the impact of MiCA on their business.
Central Bank’s preparation
The Central Bank will be the National Competent Authority (NCA) for the authorisation and supervision of entities that will be subject to MiCA.
Accordingly, the Central Bank has commenced its preparation for the implementation of MiCA and has established a cross-sectoral team to integrate MiCA into the Central Bank’s supervisory and authorisation processes and methodologies. The Central Bank will continue to monitor developments related to crypto- assets in order to assess any risks to consumer protection and financial stability.