How European Countries Are Readying Themselves for MiCA Compliance

As the Markets in Crypto-Assets Regulation (MiCA) begins to take shape across Europe, various nations are making strides to ensure compliance. MiCA aims to create a unified regulatory framework for crypto assets within the European Union, providing clarity and protection for both investors and service providers. This blog explores how different European countries are preparing for MiCA compliance, from choosing supervisory authorities to implementing national legislation and handling the increased workload.

Choosing Supervisory Authorities

One of the key steps in integrating MiCA into national laws is selecting the local regulators, known as National Competent Authorities (NCAs), who will oversee the crypto sector. This process varies from country to country:

• France: France has designated its financial regulator, the Autorité des marchés financiers (AMF), and its banking authority, the Autorité de contrôle prudentiel et de résolution, as MiCA supervisors. The AMF is currently aligning its regulations for digital asset service providers with MiCA requirements.
• Croatia: Once national legislation is adopted, MiCA responsibilities in Croatia will be divided between the Croatian National Bank and the financial regulator Hanfa. Hanfa will supervise crypto-asset service providers but will not approve crypto asset white papers.
• Slovakia and Hungary: In countries without dual financial regulators, such as Slovakia and Hungary, the central banks will handle crypto supervision. Hungary’s central bank MNB has been designated as the crypto regulator for implementing MiCA legislation.

Marina Markezic, co-founder of the European Crypto Initiative (EUCI), highlights that local supervision duties might be split between a country’s markets regulator and its central bank for stablecoins.

National Legislation

The process of adopting national legislation to align with MiCA is underway in several countries:

• Austria, Estonia, Denmark, and Croatia: These countries still require parliamentary approval for their draft national legislation. Denmark, for example, is in the process of mandating the Danish Financial Supervisory Authority (DFSA) as the national competent authority for MiCA.
• Portugal: Portugal has yet to designate its national competent authority.
• Ireland, Slovenia, Poland, and Lithuania: These countries have conducted public consultations on draft legislation.

Specific Plans

• Denmark: The Danish Parliament is expected to adopt the legislation during the spring, making the DFSA the national competent authority.
• Croatia: Plans to adopt MiCA rules in the second half of 2024, with its financial regulator Hanfa overseeing the process.

Transitional Period

Nations can diverge in their implementation of MiCA, particularly regarding the grandfathering period. This period allows crypto firms to operate under old rules while transitioning to the new regime. MiCA permits an optional 18-month transitional period, though the EU’s markets watchdog suggests limiting it to 12 months.

• Spain: Spain’s financial regulator, the National Securities Market Commission (CNMV), will apply a 12-month grandfathering period.
• Finland: Finland is still deciding on this period, with its financial regulator, FIN-FSA, expecting national legislation to be adopted in the first half of 2024.
• Latvia: Latvia’s central bank, Latvijas Banka, plans to start the licensing process and accept applications from January 1, 2025, after a six-month grandfathering period. Marine Krasovska, head of the bank’s financial technology supervision department, mentioned that the bank would pre-evaluate crypto firms interested in operating in the country.
• Netherlands: The Dutch financial regulator AFM started accepting licensing applications from crypto firms on April 22, 2024. Approved licenses will become effective when MiCA does on December 30, 2024. The country’s central bank (DNB) will handle stablecoin regulation.
• Croatia: Croatia may use the full 18-month grandfathering period, allowing entities to align their operations by mid-2026.

Preparing for Increased Workload

Regulators expect a significant increase in workload due to the new licensing requirements under MiCA. Several countries are making preparations to handle this:

• Spain: The CNMV plans to hire 70 people to work on MiCA and the EU’s cybersecurity law (DORA).
• Denmark: The DFSA has set up a dedicated MiCA team responsible for implementation.
• Hungary: The central bank has made organizational changes and established a dedicated directorate focusing on MiCA matters.

Under MiCA, countries can set fee structures for licensing and compliance, potentially attracting more businesses. Each member state aims to support its financial market ecosystem competitively.

Collaborative Efforts and Future Revisions

Several regulators, including France’s AMF, are working with the EU’s markets regulator (ESMA) and banking authority (EBA) on technical standards under MiCA. ESMA is set to provide more detailed guidance, with initial deadlines for regulatory technical standards and guidance in June, aiming for finalization by year-end.

Looking Ahead

EU policymakers are already considering future revisions to MiCA, potentially expanding its scope and tightening rules. German crypto regulator BaFin sees MiCA as a crucial first step in regulating crypto asset services and their providers. They anticipate further development in regulatory requirements, such as pooling, lending, and staking.

Key Points for the Future:

• Increased Workload: Regulators expect a significant increase in workload due to the new licensing requirements. Spain’s CNMV, for example, plans to hire 70 people for MiCA and the EU’s cybersecurity law (DORA).
• Fee Structures: Countries can set their fee structures for licensing and compliance, aiming to attract more businesses.
• Collaboration with ESMA and EBA: Regulators are working with the EU’s markets regulator (ESMA) and banking authority (EBA) on technical standards under MiCA.

Overall, the enforcement of MiCA is progressing as planned. The coordinated efforts of European nations and regulatory bodies aim to create a robust and unified framework for crypto assets, ensuring a secure and competitive market within the European Union.