The Markets in Crypto-Assets Regulation (MiCA)

What is the Markets in Crypto-Assets Regulation?

The European Parliament approved the Markets in Crypto-Assets Regulation (MiCA) in April 2023. This aims to regulate the issuance, distribution and trading of crypto-assets, as well as the provision of crypto-asset services. MiCA will enter into force in 2024.

The objective of MiCA is to provide a harmonised regulatory framework for crypto assets across the EU.

MiCA is the first effort to regulate crypto-assets at European level. It provides a legal framework for crypto-assets that are not covered by existing EU financial law.

Its objectives include:

  • The provision of greater legal certainty
  • Adequate consumer and investor protection
  • Market stability for cryptocurrency companies and investors, and
  • The imposition of regulatory oversight over crypto-asset service providers (CASPs)

What is the scope of MiCA?

MiCA applies to persons engaged in the issuance, offer to the public and admission to trading of crypto-assets, or persons that provide services related to crypto-assets in the EU.

What are the key features of MiCA?

  1. MiCA provides for categories of crypto-assets based on how they stabilise their value, namely e-money tokens (EMTs), asset-referenced tokens (ARTs) and other crypto assets such as utility tokens.
  2. MiCA sets out requirements for the offering and admitting to trading of these categories of crypto-assets, including for example transparency and disclosure requirements and measures to prevent market abuse.
  3. MiCA will also introduce an authorisation regime for CASPs, who must apply to the state where their registered office is located to passport their services within the EU.
  4. A CASP is a legal person, or other undertaking, whose occupation or business is the provision of one or more crypto-asset services to clients on a professional basis.
  5. There are 10 crypto-asset services, including exchange services, transfer services, custody services and MiFID-like services eg, portfolio management of crypto-assets, execution of orders for crypto-assets on behalf of clients.

When will MiCA come into force?

MiCA will enter into force in 2024 in two parts: the first phase in June 2024 will deal with stablecoins, and the second phase in December 2024 will deal with CASPs.

CASPs that provide their services in accordance with applicable law before 30 December 2024 may continue to do so until 1 July 2026 under MiCA’s transition period. However, Member States have been given the option to shorten or disapply this period. The Department of Finance has confirmed that Ireland will reduce the transition period to 12 months.

In addition, the Department of Finance confirmed that Ireland will not exercise the discretion under MiCA to grant existing CASPs a simpler authorisation process, on the basis that the existing virtual asset service provider (VASP) regime in Ireland is not comparable to the regime envisaged under MiCA.

What is the impact of MiCA?

The Central Bank of Ireland has commenced its preparation for the implementation of MiCA and is working on the integration of the regime into its supervisory and authorisation processes. MiCA regulation will replace the existing VASP regime.

It is hoped that increased regulatory oversight and the imposition of a harmonised regulatory framework for crypto-assets across the EU will help to restore consumer confidence in the crypto-market by mitigating risk and uncertainty in the sector.

Read the full legislation here.

We have extensive experience advising crypto operators and we advise firms who are interested in applying for authorisation under MiCA. Please reach out to a member of our team should you require advice and support in this area.