MiCA Regulations are here

- by Jeff Rundlet

The implementation of MiCA across the EU in 2024 establishes a comprehensive regulatory framework that provides much needed clarity and legitimacy for crypto while aiming to foster innovation and protect consumers.?However, provisions like Article 68 on trading platform rules have raised concerns about potential impacts on privacy and the core principles of decentralization that underpin blockchain technology.?As the first major jurisdiction to roll out such expansive crypto regulation, the EU's balanced approach in MiCA could shape global standards and serve as a model for other countries grappling with this emerging asset class. Listen up America!

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Cryptio provides solutions for MiCA requirements from reconciliation controls, both wallet completeness and API reconciliation (think large scale multi-source), maintaining a ledger of truth, and streamlining the reporting.? Bringing confidence to financial reporting.

Here I highlight Article 22 which defines deadlines, reporting obligations & data requirements.? Article 22 of MiCA establishes two key implementation deadlines: June 30, 2024 for the provisions related to asset-referenced tokens (ARTs) and e-money tokens (EMTs), and December 30, 2024 for the broader regulation of crypto-asset service providers (CASPs) like exchanges and custodians.?By setting these staggered dates, Article 22 aims to first address risks around stablecoins, while providing more time for the rapidly evolving crypto industry to adapt to the comprehensive MiCA framework governing all crypto activities in the EU.

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June 30, 2024: Stablecoin Regulation Begins

Asset-Referenced Tokens (ARTs)

• ARTs aim to stabilize their value by referencing another value or right, or combination thereof, including one or several official currencies.
• Issuers must obtain authorization and meet strict requirements around reserve management, custody, investment policies, and disclosure.
• ARTs must be backed by a reserve of liquid assets worth at least the outstanding tokens.
• The reserve assets must be segregated and not used for other purposes by the issuer.
• Issuers must have a detailed plan for investing the reserve assets conservatively.
• There will be capital requirements and rules around governance for ART issuers.? This article is concise, and MiCA is broad – please review capital requirements by category or reach out to discuss more.

E-Money Tokens (EMTs)

• EMTs aim to stabilize their value by referencing only one official currency. Think USDC, however not covered under EU - Circle is working on a European stablecoin.
• Issuers must be authorized credit institutions or e-money institutions under existing EU rules.
• EMTs must be issued at par value and redeemable at any time.
• Strict rules around safeguarding of funds backing EMTs will apply.
• Issuers will face capital, governance, and operational requirements. Again, please review requirements by category or reach out to discuss more.

Reporting requirement:

1. Submit quarterly reports if the issue value exceeds €100,000,000.
2. Provide the following details in reports: a) Number of token holders, b) Total value of issued tokens and asset reserves, c) Daily average number and value of transactions for the quarter, d) Estimated daily average number and value of transactions used within a single currency area as a means of exchange.

Supervision

• The EBA (European Banking Authority) will directly supervise issuers of "significant" ARTs/EMTs based on criteria like value, cross-border activities, and interconnectedness.
• Other ART/EMT issuers will be supervised by national authorities.
• There will be cooperation mechanisms between the EBA and NCAs (National Competent Authority).

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December 30, 2024: Broader Crypto Regulation

Crypto-Asset Service Providers (CASPs)

• Exchanges, custodians, wallet providers and other CASPs must be authorized.
• Stringent rules around conduct, organization, prudential treatment apply.
• CASPs must comply with AML, consumer protection and environmental disclosure rules.

Crypto-Asset Issuers

• Issuers must publish detailed whitepapers and marketing materials.
• Rules around transparency, disclosure, governance and conflicts of interest.
• Potential for exemptions for small offerings or specific crypto-asset types.

Market Integrity and Oversight

• Prevention of market manipulation and insider dealing in crypto markets.
• Potential for regulated crypto trading venues and platforms.
• Cooperation mechanisms between NCAs and third-country regulators.

Transition Period

• Existing CASPs may have 6-18 months transition to obtain MiCA license, depending on national regimes.
• Issuers and service providers must comply with MiCA fully by this date.

In Summary...The phased implementation, with stablecoins first and then broader crypto regulation, aims to address key risks while providing a transition for the rapidly evolving crypto industry across the 27 EU member states.

MiCA is broad and complex.? At Cryptio we have worked on specific MiCA solutions, in addition with focused professionals in the field who can help navigate this huge undertaking.? Please reach out to see how Cryptio or our network of professionals can help.