The Markets in Crypto Assets Regulation (MiCA) entered into force in June 2023. It creates a common set of rules applicable to issuers and offerors of crypto-assets as well as those looking to engage in the provision of regulated crypto-asset services in the EU (such as crypto-exchanges). MiCA also introduces a common taxonomy of crypto-assets by differentiating between the following three groups of crypto-assets in relation to each of which a separate set of regulatory requirements will apply:
- Asset referenced tokens (ARTs);
- E-money tokens (EMTs); and
- Other crypto-assets (a catch all category that aims to cover all other crypto-assets that are not regulated under existing financial regulations in the EU).
Timings
MiCA has two sections (Title III and Title IV) related to stablecoin issuers (ARTs and EMTs). These are the first regulations to come into force in June 2024, with the remaining regulations, including those applicable to other crypto-assets and crypto-asset service providers (CASPs), to come into force in December 2024.
MiCA includes a substantial number of Level 2 and Level 3 measures (technical standards) that will need to be developed, within 12 to 18 month deadlines, by the European Supervisory Authorities (ESMA, EBA and EIOPA) before the new regime commences. Once finalised they will provide greater granularity on the provisions in MiCA and are important to industry and national competent authorities, such as the Central Bank of Ireland, as the technical standards will provide detailed specifications of key obligations for firms, including applicant firms seeking CASP authorisation and detail regarding the supervisory responsibilities of the national competent authorities.
MiCA transitional measures
Member States will have the option of implementing ‘transitional measures’ (Article 143 of MiCA) that would allow entities or undertakings already providing crypto-asset services under applicable law in their jurisdictions to continue doing so during the transitional phase of MiCA (i.e., the period of 18-months after full application in December 2024). Such transitional measures include:
- a ‘grand-fathering’ option, allowing entities providing crypto-asset services in accordance with national applicable laws before 30 December 2024 to continue to do so until 1 July 2026 or until they are granted or refused a MiCA authorisation; and
- a simplified authorisation procedure for entities that were already authorised under national applicable law on 30 December 2024 to provide crypto-asset services.
The Central Bank of Ireland has stated that it is engaged with the Department of Finance who will consult on the exercise of this discretion in due course.
MiCA Consultation Process – ESMA
The European Securities and Markets Authority (ESMA) recently published a timeline confirming its plans for three consultation packages.
On 12 July 2023, ESMA published its first consultation package on MiCA, inviting feedback from stakeholders by 20 September 2023. This package includes technical standards for the following mandates: authorisation and notification requirements for CASPs, complaint-handling procedures, identification and management of conflicts of interest, and the assessment of intended acquisitions of qualifying holdings by CASPs.
The second consultation package is expected to be published by October 2023 and will likely cover all remaining mandates that have a 12-month deadline, to include: sustainability indicators, business continuity requirements, trade transparency data and order book record-keeping, record keeping requirements for CASPs, classification and templates and format of crypto-asset white papers and public disclosure of inside information.
The third and final consultation package is expected to be published in Q1 2024 and will likely cover all those remaining mandates that have an 18-month deadline, to include: the qualification of crypto-assets as financial instruments; monitoring, detection, and notification of market abuse; investor protection (reverse solicitation, suitability of advice and portfolio management services to the client, and policies and procedures for crypto-asset transfer services, including clients’ rights); and system resilience and security access protocols.
Source: ESMA
MiCA Consultation Process – EBA
The European Banking Authority (EBA) is entrusted with the task of supervising significant ARTs and EMTs and has also been made responsible for developing 17 technical standards and guidelines to further specify the requirements for ARTs and EMTs.
On 12 July 2023, the EBA published its first consultation package, focusing on ART authorisations, the assessment of a proposed acquisition of qualifying holdings in issuers of ARTs, and complaints handling procedures for issuers of ARTs. It will remain open to stakeholder feedback until 12 October 2023. The second consultation package is likely to be published in Q3 2023 and is due to cover mandates on the approval of ART white papers (for tokens issued by credit institutions) and suitability of members of the management body of ART issuers and CASPs. The EBA has indicated that its remaining consultation package, to include prudential mandates, will be made available before the end of 2023.
Relevance
To prepare for the implementation of the MiCA, firms will need to analyse the impact of the regulation on their businesses.
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