On Jun. 30, EU CNCL confirmed agreement on crypto-asset regulation.
EU CNCL and EP reached provisional agreement on markets in crypto-assets proposal.
Follows EU CNCL Apr. 2022 3 column note on MiCA draft regulation, see #131895.
Follows EU CNCL Jun. 2022 agreement on crypto asset transfers, see #142019.
MiCA Proposal
The European Union is to bring crypto-assets, crypto-assets issuers and crypto-asset service providers under a regulatory framework for the first time.
The MiCA proposal covers issuers of unbacked crypto-assets, and so-called stablecoins, as well as the trading venues and the wallets where crypto-assets are held.
This regulatory framework will protect investors and preserve financial stability, while allowing innovation and fostering the attractiveness of the crypto-asset sector.
Will bring more clarity in EU, as some member states already have national legislation for crypto-assets, but so far there had been no regulatory framework at EU level.
Regulating Crypto Risk
MiCA will protect consumers against some of the risks associated with crypto-assets, and help them avoid fraudulent schemes; currently, consumers have very limited rights to protection or redress, especially if the transactions take place outside EU.
With new rules, crypto-asset service providers will have to respect strong requirements to protect consumers wallets, and become liable if they lose investors’ crypto-assets.
MiCA will also cover any type of market abuse related to any type of transaction or service, notably for market manipulation and insider dealing.
Actors in crypto-assets market will be required to declare information on ESG footprint.
ESMA will develop draft RTSs on the content, methodologies and presentation of information related to principal adverse environmental and climate-related impact.
EC ESG Report
Within two years, the European Commission will have to provide a report on the environmental impact of crypto-assets and the introduction of mandatory minimum sustainability standards for consensus mechanisms, including the proof-of-work.
To avoid any overlaps with updated legislation on anti-money laundering (AML), which will now also cover crypto-assets, MiCA does not duplicate the anti-money laundering provisions as set out in the newly updated transfer of funds rules agreed on Jun. 29.
However, MiCA requires that the European Banking Authority (EBA) will be tasked with maintaining a public register of non-compliant crypto-asset service providers.
Crypto-asset service providers, whose parent company is located in countries listed on the EU list of countries considered a high AML risk, as well as on the EU list of non-cooperative jurisdictions for tax purposes, will need to implement enhanced checks.
Tougher requirements may also be applied to shareholders and to the management of the CASPs, notably with regard to their localization.
Stablecoins Framework
Recent events in stablecoins markets showed once again the risks incurred by holders in the absence of regulation, as well as the impacts it has on other crypto-assets.
MiCA will protect consumers by requesting stablecoins issuers to build up a sufficiently liquid reserve, with a 1/1 ratio and partly in the form of deposits.
Every stablecoin holder will be offered a claim at any time and free of charge by issuer.
And the rules governing reserve will also provide for an adequate minimum liquidity.
Furthermore, all stablecoins will be supervised by the European Banking Authority (EBA), with a presence of the issuer in the EU being a precondition for any issuance.
Development of asset-referenced tokens (ARTs) based on a non-European currency, as widely used means of payment, will be constrained to preserve monetary sovereignty.
Issuers of ARTs will need to have a registered office in the EU to ensure the proper supervision and monitoring of offers to the public of asset-referenced tokens.
Framework will provide the expected legal certainty and allow innovation to flourish.
EU-Wide Rules
There will be EU-wide rules for crypto-asset service providers, different crypto assets.
Under the provisional agreement reached today, crypto-asset service providers (CASPs) will need an authorization in order to operate within the EU.
National authorities will be required to issue authorizations within 3 month timeframe.
For the largest CASPs, national authorities will transmit relevant information to ESMA.
Non-fungible tokens (NFTs), i.e. digital assets representing real objects will be excluded from the scope except if they fall under existing crypto-asset categories.
Within 18 months EC will be tasked to prepare a comprehensive assessment and, if deemed necessary, a specific, proportionate and horizontal legislative proposal to create a regime for NFTs and address the emerging risks of such new market.
Effectiveness
The provisional agreement is subject to approval by the Council and the European Parliament before going through the formal adoption procedure.
On Jun. 30, 2022, a provisional agreement was reached, followed by technical work, resulting in the final compromise text as set out in doc. 12933/22 + ADD 1.
COREPER is invited to approve the text of draft Regulation (MiCA 2020/0265 (COD)), with a view to reaching an agreement at first reading with the European Parliament.
And give to the Chairman of COREPER the mandate to inform the Chair of EP's ECON Committee that, should the EP adopt the text of the proposal in the exact form set out, the Council would adopt the proposed Regulation thus amended.
Oct. 5, 2022 Letter to EP
On Oct. 5, 2022, EU CNCL issued information note regarding letter sent to the ECON chair confirming that the draft compromise package had been agreed by COREPER.
In Dec. 2022, EC issued proposals and FAQs relating to crypto tax rules, see #155959.
On Apr. 20, 2023, EP approved new common rules on the supervision, consumer protection, environmental safeguards of crypto-assets, e.g. crypto-currencies (MiCA).
Text was provisionally agreed upon, included safeguards against market manipulation and financial crime, and covered crypto-assets that weren't currently regulated.
Key provisions for those issuing and trading crypto-assets, e.g. asset-reference/e-money tokens, cover transparency, disclosure, authorization, transactions supervision.
To counter money-laundering risks, ESMA should set up a public register for non-compliant crypto assets service providers that operate in the EU without authorization.
The text will now have to be formally endorsed by EU CNCL before its publication in the EU official journal; entry into force will be 20 days after its official publication.
May 2023 EU CNCL Final Adoption
On May 16, 2023, EU CNCL adopted regulation on markets in crypto-assets (MiCA).
Formal adoption is final step in legislative process, reg to be officially published soon.
Harmonized EU regulatory framework that, given global nature of crypto markets, is improvement compared to current situation with national laws in some EU States only.
Jun. 2, 2023 Adopted Text
On Jun. 2, 2023, EU CNCL issued the final adopted text of regulation, dated May 31.
Regulation shall enter into force on the 20th day following that of its OJ publication.
It shall apply from 18 months after entry into force, subject to the below derogations.
Titles III and IV shall apply from 12 months after entry into force of the regulation.
Articles 2(5), 3(2), 6(11) and (12), Article 14(1), second subparagraph, Articles 17(8), 18(6) and (7), 19(10) and (11), 21(3), 22(6) and (7), 31(5), 32(5), 34(13), 35(6), 36(4), 38(5), 42(4), 43(11), 45(7) and (8), 46(6), 47(5), 51(10) and (15), 60(13) and (14), 61(3), 62(5) and (6), 63(11), 66(6), 68(10), 71(5), 72(5), 76(16), 81(15), 82(2), 84(4), 88(4), 92(2) and (3), 95(10) and (11), 96(3), 97(1), 103(8), 104(8), 105(7), 107(3) and (4), 109(8), 119(8), 134(10), 137(3) and Article 139 shall apply from date of entry into force of the regulation.
Jun. 9, 2023 Official Journal
On Jun. 9, 2023, EU CNCL issued final MiCA Reg 2023/1114 in the Official Journal.
Regulation shall enter into force on the 20th day following that of its OJ publication.
It shall apply from Dec. 30, 2024, subject to the derogations set out below.
Titles III and IV shall apply from Jun. 30, 2024; articles 2(5), 3(2), 6(11) and (12), Article 14(1), second subparagraph, Articles 17(8), 18(6) and (7), 19(10) and (11), 21(3), 22(6) and (7), 31(5), 32(5), 34(13), 35(6), 36(4), 38(5), 42(4), 43(11), 45(7) and (8), 46(6), 47(5), 51(10) and (15), 60(13) and (14), 61(3), 62(5) and (6), 63(11), 66(6), 68(10), 71(5), 72(5), 76(16), 81(15), 82(2), 84(4), 88(4), 92(2) and (3), 95(10) and (11), 96(3), 97(1), 103(8), 104(8), 105(7), 107(3) and (4), 109(8), 119(8), 134(10), 137(3) and article 139 shall apply from Jun. 29, 2023.
On the same day, EU CNCL issued final regulation on crypto transfers, see #142019.
In Jun. 2023, EUROJUST reported on meeting re AML, asset recovery, see #176885.
In Nov. 2023, EBA issued multiple consultation papers as part of third batch of MiCA Reg policy products, see #190667, #190668, #190672, #190676, and #190683.
In Nov. 2023, EC proposed new rules on criteria, procedures and fees, see #190789.
May 2024 Official Journal
On May 2, 2024, EU CNCL issued corrigendum to Reg 2023/1114 in Official Journal.
