Antonio Lanotte
Tax Technology Committee — CFE Bruxelles
Advisory Council — Blockchain for Europe
Tommaso Astazi
Head of EU Regulatory Affairs Blockchain for Europe
The MiCA (Markets-in-Crypto-Assets) Regulation, a European Regulation containing important provisions on the Community regulation of the market of so-called “Crypto-Assets” has recently been finalized in its final version. The final text, at this point, is ready to be approved by the Economic and Monetary Affairs Committee (ECON) of the European Parliament on October 10, and then to be officially ratified by the European institutions at the end of October. The MiCA Regulation will first be translated into all official languages of the European Union and then published in the European Official Journal by the first quarter of 2023 (Q1–2023). The new rules will apply from 18 months, this phase of implementation, after the effective date, so concretely from mid-2024.
In this context, it is important to point out how Title III of the Regulations (on stablecoins referring to a “basket of currencies”) and Title IV (on stablecoins with e-money) will instead apply as early as 12 months after entry into force, i.e., as of Q1 2024 (Q1–2024).
The MiCA Regulation establishes fully harmonized requirements for Member States, especially with respect to those who, with a specific authorization and/or license, intend to offer services related to crypto-assets within the European Union and thus throughout the Single Market.
The European Regulation is intended to replace existing national Regulatory frameworks with regard to crypto-assets, effectively going so far as to introduce specific rules with regard to so-called “stablecoins”, a digital currency pegged to a stable reserve asset such as the U.S. dollar, the Euro, or to “commodities” such as gold, with this pegging intended to reduce its volatility.
In the Regulations, stablecoins are called “asset-referenced tokens” when the value refers to a “basket of currencies,” or “e-money tokens” when these are considered e-money since they are pegged to an official currency.
The Regulation contains as many as 126 articles that mainly deal with the offering and marketing of crypto-assets, the issuance of asset-referenced tokens and e-money tokens, the authorization and operating conditions for crypto-asset service providers (CASPs), the prevention of abuses of dominant positions in the crypto-asset market, and finally the increasingly decisive role of competent authorities such as ESMA — The European Securities and Markets Authority — and EBA — The European Banking Authority. Among the main innovations under the MiCA Regulations we see, first of all, a clear definition of crypto-assets and consequent distinction from “asset-referenced tokens” (ARTs) (secured by a basket of currencies) and “e-money tokens” (EMTs). A further distinction is then made for other “crypto-assets,” defined as a “digital representation of value or rights, which can be transferred and stored electronically, using a distributed ledger or similar technology, example a Blockchain.” A “utility token”, on the other hand, is defined as a type of crypto-asset that is intended to provide digital access to a good or service, available on DLT — Digital Ledger Technology (an example of DLT is the Blockchain) , and is accepted only by the issuer of that token.
Countless other novelties introduced by the MiCA Regulations with particular regard to those (e.g. Crypto Asset Service Providers — CASPs) which intend, through appropriate licensing/authorization, to offer crypto-asset related services, among others: 1. requirement to publish a “white-paper” (smaller issuers and utility tokens are exempt) aimed at informing and protecting investors; 2. include in the white paper information about the project, the bidder, the risks, but also the environmental impact of the DLT technology used; 3. notify the competent authority of the white paper at least 20 days before its publication; 4. update the white paper in case of significant changes; 5. to act honestly and with professional diligence; 6. to prevent, identify, avoid and where appropriate promptly communicate if conflicts of interest exist; 7. to offer crypto-asset holders a right of withdrawal, giving them a period of 14 business days to withdraw their purchase order without incurring fees; 8. to act in the best interest of crypto-asset holders; 9. establish effective arrangements to monitor and safeguard the funds collected during an offering; 10. in the event that a crypto-asset offering is cancelled for any reason, the offeror will ensure that the funds collected from buyers are duly returned to them within 25 days of the date of issuance; 11. Finally, that any crypto-asset marketing communication must be clearly identifiable, contain correct, clear and not misleading information, and must be notified to the competent authority.
Other important provisions relate to the transition period that will allow entities already licensed to provide crypto-assets services by existing legislation in the member states of the Union to be able to continue providing the same services for 18 months from the effective date of the Rules, before having obtained a new license under the new rules established by the MiCA Regulations.
In conclusion, although the Regulation will finally succeed in harmonizing national rules on crypto-assets and related services, there are some points that will need to be clarified in the coming months.
For example, the final text unfortunately does not provide a well-defined position on Non Fungible Tokens — NFTs. An NFT is a unique, non-transferable unit of data that can be sold and traded, stored in a digital ledger known as a blockchain, essentially cryptographic tokens that embed a right to a generally digital asset. The situation is similarly clouded with regard to so-called Decentralized Finance — DeFI , innovative financial services based precisely on blockchain technology. For more clarity with respect to how these two distinct phenomena will be regulated, it will be necessary to await the issuance of subsequent EU Directives, guidelines and Regulatory Technical Standards (RTS) produced by the European Commission and other relevant bodies, such as the EBA and ESMA.
