Markets in Crypto-Assets (MiCA) is a

regulation Regulation is the management of complex systems according to a set of rules and trends. In systems theory, these types of rules exist in various fields of biology Biology is the scientific study of life. It is a natural science with a ...

EU law European Union law is a system of rules operating within the member states of the European Union (EU). Since the founding of the European Coal and Steel Community following World War II, the EU has developed the aim to "promote peace, its value ...

. It is intended to help streamline

distributed ledger technology A distributed ledger (also called a shared ledger or distributed ledger technology or DLT) is the consensus of replicated, shared, and synchronized digital data that is geographically spread (distributed) across many sites, countries, or institutio ...

(DLT) and virtual asset regulation in the

European Union The European Union (EU) is a supranational political and economic union of member states that are located primarily in Europe. The union has a total area of and an estimated total population of about 447million. The EU has often been ...

(EU) whilst protecting users and investors. MiCA was approved on 20 April 2023 by the EU Parliament and will become law in 2024.

Title

The full name of the 24 September 2020 proposal is the "Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on Markets in Crypto-assets, and amending Directive (EU) 2019/1937 COM/2020/593 final". MiCA is part of a Digital Finance Package that intends to transform the European economy in the coming decades.

Function

MiCA provides legal certainty around crypto assets –

cryptocurrencies A cryptocurrency, crypto-currency, or crypto is a digital currency designed to work as a medium of exchange through a computer network that is not reliant on any central authority, such as a government or bank, to uphold or maintain it. It ...

security tokens A security token is a peripheral device used to gain access to an electronically restricted resource. The token is used in addition to or in place of a password. It acts like an electronic key to access something. Examples of security tokens incl ...

and

stablecoin Stablecoins are cryptocurrencies where the price is supposed to be pegged to a reference asset, which is either fiat money, exchange-traded commodities (such as precious metals or industrial metals), or another cryptocurrency. In theory, the p ...

s.It is similar to Europe’s Markets in Financial Instruments Directive (

MiFID Markets in Financial Instruments Directive 20142014/65/EU commonly known as MiFID 2 (Markets in financial instruments directive 2), is a legal act of the European Union. Together with Regulation (EU) No 600/2014 it provides a legal framework fo ...

), which is a legal framework for securities markets, investment intermediaries and trading venues. MiCA encompasses a wide range of participants in the crypto-market, including crypto-asset issuers and service providers like trading platforms, exchanges, and custodian wallet providers. A key benefit of the MiCA proposal is that it permits banks, investment firms, and other financial institutions to engage in crypto-market activities, provided they have authorization under MiFID II to offer services. It is expected to be different from the UK's crypto regulatory framework. The UK will start by regulating only a few crypto assets, while the EU's MiCA regime is expected to have a wider focus.

History

Groundwork for MiCA started in 2018 due to increased public interest within the EU in cryptocurrencies. The European Commission adopted the digital finance package which included MiCA in September 2020, leading to extensive discussions among the preparatory bodies (the EU Council, the European Central Bank, the Economic and Social Committee). After 18 months of debate, the European Union passed the Markets in Crypto-Assets regulation (MiCA) in 2022. Regulations on stablecoins were expected to take effect in June 2024 and those affecting crypto asset service providers in the following December. However, service providers with fewer than 15 million active users in Europe would not be considered “significant” under Mica and so would be supervised by national EU authorities rather than the

European Banking Authority The European Banking Authority (EBA) is a regulatory agency of the European Union headquartered in Paris. Its activities include conducting stress tests on European banks to increase transparency in the European financial system and identifying ...

and the

European Central Bank The European Central Bank (ECB) is the prime component of the monetary Eurosystem and the European System of Central Banks (ESCB) as well as one of seven institutions of the European Union. It is one of the world's most important centra ...

. Elizabeth McCaul, a member of the ECB Supervisory Board, warned of “gaps in the framework” for regulating crypto markets and that traditional approaches might not work. She said that the 15m threshold would probably exclude

Binance Binance is a cryptocurrency exchange which is the largest exchange in the world in terms of daily trading volume of cryptocurrencies. It was founded in 2017 and is registered in the Cayman Islands. Binance was founded by Changpeng Zhao, a de ...

, and

FTX FTX Trading Ltd., commonly known as FTX (short for "Futures Exchange") is a bankrupt company that formerly operated a cryptocurrency exchange and crypto hedge fund. The exchange was founded in 2019 and, at its peak in July 2021, had over one mi ...

before its collapse. She had made similar warnings at a ''Financial Times'' conference in November 2022.

External links

MiCA text adopted by European Parliament on 20 April 2023 on europa.eu

MiCA on europa.eu

Procedure 2020/0265/COD
on EUR-Lex
Procedure 2020/0265(COD)
on ŒIL

References

Blockchains Cryptocurrencies European Union regulations {{EU-law-stub