The Markets in Crypto-Assets Regulation (MiCA) is setting a precedent, crafting a well-structured framework for regulating crypto-assets throughout the European Union (EU) which are not yet encased by current financial services legislations.
Instituted to counteract the absence of encompassing rules concerning services connected to such assets, MiCA aims to shield consumers and investors from considerable risks. The initiative took its first formative step with the publication of its initial Consultation Package on 12 July, which asked for feedback on aspects such as authorisation, identification, conflict of interest management, and complaint handling for crypto-asset service providers.
MiCA’s timeline extends to December 2024. The first package, which was released in July 2023, sought insights on authorisation, management of conflicts, and complaints. Moving forward, the second package, published on 5 October, seeks feedback on sustainability indicators for distributed ledger technology, insider information disclosures, white paper technical requirements, trade transparency measures, and record-keeping standards for service providers. Feedback on this second package is anticipated by 14 December.
Mark Browne, partner at Clerkin Lynch LLP, shed light on the advent of MiCA, highlighting that its inception was primarily due to a palpable lack of legislative clarity within the EU market, especially regarding tokens. The question of whether tokens fall under existing legislations like MiFID, the Electronic Money Directive, or the Payment Services Directive remains shrouded in interpretational ambiguity and distinct lack of clarity.
Moreover, the scope of MiCA is both explicit and future-oriented. It is devised to be adequately broad to adapt to inevitable industry changes while also being sufficiently specific to ensure regulatory and legal certainty. Notably, MiCA introduces a consolidated legislative framework for Crypto-Assets applicable to all pertinent issuers and service providers within the EU. This legislation categorises regulated crypto-assets into three distinct classes: Electronic Money Tokens (e-Money Tokens), Asset Referenced Tokens, and Utility Tokens, each subject to varying requirements based on their respective entailed risks.
MiCA provides a wide-ranging and inclusive taxonomy, containing numerous defined terms that are inter-referenced throughout the legislation. Mark underscores that understanding this legislation commences with comprehending the taxonomy of terms contained within the document, diving the definitions into five categories: Token definitions, technology definitions, participant definitions, activity definitions, and legal definitions.
Furthermore, MiCA encompasses key provisions for those issuing and trading crypto-assets, including transparency, disclosure, authorisation, and the supervision of transactions. Tokens and Crypto-Asset Service Providers (CASPs) are regulated under the legislation, necessitating both issuers of Crypto-Assets and CASPs to implement robust Consumer Protection safeguards. Article 111 of the MiCA legislation delineates potential penalties for non-compliance with the provisions.
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