Discovering the world of Crypto Regulation
In the fascinating world of crypto, a couple of years back, the word Regulation was something unthinkable or even untouchable. Regulators globally especially the Central Banks were in an open “war” with cryptos until they have realised that cryptos are going nowhere, and they came to stay for ever.
By realising that Regulators have changed drastically their approach. In simple words they have applied the saying “if you cannot beat them join them”.
Wise words and wise approach since by regulating cryptocurrencies they will now control the once uncontrollable space of crypto.
You can see the whole presentation about crypto regulations in the video below:
So, what is this new crypto regulation that will come soon in force?
The answer is simple…. this is MiCAR and believe me it will bring all the magic.
MiCAR stands for Markets in Crypto Assets Regulation and is the most comprehensive cryptocurrency regulation in the world which came to force in June 2023 and is expected to be fully implemented by the 30th of December 2024.
The Markets in Crypto Assets Regulation (also known as “MiCA“) is an EU-wide regulation relating to crypto assets, which initially was adopted by the European Parliament on the 20th of April 2023 as part of the European “Digital Finance Package” published by the European Commission on 24th of September 2020.
What is the new EU Regulation for crypto trying to achieve?
The MiCA Regulation (Regulation 2023/1114) intends to:
protect investors
provide transparency
prevent market abuse such as insider trading and manipulation,
prevent money laundering and terror financing activities by imposing the responsibility on crypto companies to send information of senders and recipients of crypto assets to their local anti-money laundering authority. Note that the purpose of preventing Money Laundering and Terrorist Financing on crypto-assets’ activities are already covered under the 5th AML Directive12 at EU level (“AMLD5”) which currently governs all existing Virtual Asset Service Providers (VASPs)
preserve financial stability, while fostering innovation and promoting the attractiveness of the crypto-asset sector
MiCAR will categorize crypto assets mainly into three types:
Electronic Money Tokens (EMTs),
Asset-Referenced Tokens (ARTs, i.e. stablecoins)
All other centralised Tokens (i.e. utility tokens)
MiCAR does not cover crypto assets, which are fully decentralised. For example, the world's most well-known cryptocurrency, like bitcoin, is not itself regulated by the MiCA Regulation. It is also very important to emphasize that so far only USDC has achieved full compliance with the MiCA Regulation. On the contrary, at the moment of writing, USDT is not yet MiCAR compliant. Additionally, NFTs are not regulated under MiCA since they are considered “unique and not fungible with other crypto assets”.
When to expect the implementation of MiCAR?
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). These transitional measures include:
A ‘grand-fathering’ clause Art. 143 (3) – 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 MiCA authorisation
A simplified authorisation procedure Art. 143 (6) – for entities that were already authorised under national applicable law on 30 December 2024 to provide crypto-asset services
What are the benefits of being MiCA compliant?
Being MiCA compliant introduces new obligations for Crypto-Asset Service Providers, but at the same time it will transform completely the landscape for these providers since it is expected that will ease and improve the tensed banking relationships and boost the confidence of all those investors who will consider investing in crypto assets.
Presently unregulated firms operating in the crypto space must get used to the new obligations that come with being a fully regulated entity. Such firms will need MiCA authorization and will be subject to an array of prudential and organizational requirements. However, MiCA compliant firms with viable business proposition and consumer protection measures will have ample opportunities as they will stand out from the unregulated and will proceed to thrive in the growing and promising crypto economy.
To summarize:
The MiCA regulation will cover crypto assets that are not currently regulated by existing financial services legislation such us The Investment Services and Activities and Regulated Markets Law/MiFID II like CFDs on cryptos, asset backed security tokens and native security tokens. Key provisions for those issuing and trading crypto assets (including asset-reference tokens and e-money tokens) will promote transparency, full disclosure, authorisation and supervision of all crypto transactions. Furthermore, the new legal framework will support market integrity and financial stability by regulating public offers of crypto-assets and by ensuring that consumers are better informed about their associated risks as well as provide them a better and safer environment to invest in crypto assets.
In simple words, MiCAR will separate the Men from the Boys and we at Probinex welcome the new regulatory environment as we do work hard nowadays for the upgrade of our licence from VASP to CASP.
