On 20 April 2023, the European Parliament adopted the Regulation Proposal dated 24 September 2020 pertaining to Markets in Crypto Assets (“MiCA“), with 517 votes in favor, 38 against and 18 abstentions, which was submitted by the European Commission as part of its digital finance strategy. This regulation is the most comprehensive legislation regarding crypto-assets to date and sets out the legal status of crypto-assets within the European Union (“EU“) and the standard rules to be applied, including monitoring transactions of crypto-assets, consumer protection, preventing market manipulation and combating financial crime.
Although licensing regulations have already been introduced in some EU countries, notably Estonia and Malta, divergences in practice and deficiencies in the supervisory function have made it necessary to adopt a uniform regulation to establish consumer protection rules for the issuance, trading, exchange and storage of crypto-assets and to take measures to prevent market manipulation in order to ensure the integrity of crypto-asset markets. In light of these reasons, the EU’s main objective with MiCA is to (i) ensure transparency and disclosure requirements for the issuance and trading of crypto-assets, (ii) authorize and supervise crypto-asset service providers and issuers of asset-referenced tokens (“ART“) and electronic money tokens (“EMT“), and (iii) ensure the functioning, organization and governance of ART and EMT issuers and crypto-asset service providers.
Compliance with MiCA will be required for the public offering of crypto-assets, the admission of crypto-assets to trading and the providing of crypto-asset services within the EU. Regulations have been introduced for the (i) issuers of crypto-assets other than ART and EMT (“CAI“) or (ii) issuers of ART or (iii) issuers of EMT or (iv) crypto-asset service providers (“CASP“) that perform these services. Hence, in order to protect consumers and investors; MiCA includes a number of provisions and rules on transparency, authorization and supervision of transactions regarding the issuance and trading of crypto-assets, that are currently not regulated under the existing financial services legislation.
MiCA aims to inform consumers about the risks and costs associated with their transactions and to ensure market integrity and financial stability. Accordingly, under MiCA, those who offer crypto-assets to the public or provide a crypto-asset trading platform will be required to prepare a technical report (“white paper”) containing information about the relevant assets. Specific rules have also been introduced to prevent unlawful insider trading and market manipulation; and incomplete, unfair or unclear white papers, misleading information or the faults of the crypto-asset issuers will entitle those who suffer losses to compensation.
MiCA also includes measures against market manipulation and measures to prevent money laundering, financing terrorism and other criminal activities. To counter money laundering risks, the European Securities and Markets Authority (“ESMA”) will monitor non-compliant and unauthorized crypto-asset service providers operating in the EU. ESMA has been given powers to prohibit or restrict services if investors are not adequately protected or if market integrity or financial stability appears to be threatened. The implementation of the procedures and principles of MiCA will be determined by the cooperation of EU member states with ESMA and the European Banking Authority (“EBA”).
Within the scope of compliance with the EU, amendments may be expected to be made to the draft, which is being worked on in Turkey, which previously envisaged the introduction of licenses for crypto-asset platforms. It is likely that there will be differences in practice, especially for CASPs providing services abroad, and that the requirements of MICA will be expected to be met.