EU lawmakers approve MiCA bill to regulate crypto

While MiCA largely applies to crypto asset service providers (CASPs) providing crypto services to EU residents, some areas fall outside MiCA’s scope. These include crypto assets such as:

• Are unique and not fungible with other crypto assets, such as digital art and collectibles
• Qualify as financial instruments as defined below Directive 2014/65/EUfor example security tokens
• Represents services or physical assets that are unique and non-exchangeable, including property or product warranties
• Offered for free, or created automatically

Classification of crypto assets

The MiCA Bill introduces three sub-categories of crypto assets based on whether an asset seeks to stabilize its value in relation to other assets. These include asset reference tokens, e-money tokens and other crypto-assets.

Asset Reference Tokens are assets that maintain a stable value by referencing multiple currencies, one or more cryptoassets, one or more commodities, or a combination of such assets. In contrast, e-token assets that aim to stabilize value by referring to only one official currency, for example stablecoins. All other cryptoassets that do not fall into any of the aforementioned groups make up MiCA’s third subcategory.

CASP requirements

Under MiCA, potential retail holders of cryptoassets must be informed of the characteristics, features and risks of the cryptoassets they intend to purchase. Therefore, CASPs will be required to compile a whitepaper containing general information on

• Issuer and provider
• Rights and obligations related to crypto assets
• Underlying technology used for such assets
• Related risks

Prior approval for market communications will also be required for asset reference and e-money tokens. All advertising messages and marketing materials shall be fair, clear, not misleading and consistent with the information provided in the Crypto Assets White Paper.

Additional requirements for asset reference tokens and e-money tokens include regulatory approval before launching new services and vetting of key personnel. In terms of governance, the bill notes that issuers of asset-backed tokens should have robust governance arrangements, including a clear organizational structure and effective processes for identifying, managing, monitoring and reporting the risks they are or may be exposed to.

More information on the key options for CASPs can be found here.

Next step

The MiCA Bill points to a more comprehensive, strategic view of crypto-assets being adopted by the EU and a greater understanding of how they integrate into the wider financial services ecosystem.

Before the law can be signed in the Official Gazette, it must be voted on a European Parliament plenary sessionpossibly in November. If no changes are made, the bill will go ahead and be signed into law during December’s plenary session. From then, crypto firms will have up to 18 months to prepare for the changes, with the bill likely to come into force in 2024.

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