Back in September of 2020, the European Commission had presented a proposal for a Regulation on Markets in Crypto-Assets, otherwise referred to as MiCA, in addition to an amendment to the Directive (EU) 2019/1937. The foundations of such initiative find their source in Article 114 of the Treaty on the Functioning of the European Union (TFEU), according to which the EU is competent in suggesting provisions for the legal approximation of its’ Member States, as well as in Article 26 of the same text, which establishes the functioning of the internal market. While in March of 2019, the EU Commission, in an effort to promote a “more competitive and innovative European financial sector”, suggested the FinTech Action Plan, which would prepare the EU for the new digital era, by supporting innovation and competition in terms of digital finance, while offering investors significant protection from potential risks.
In light of the above, the newly agreed upon Regulative text aims to ensure transparency and disclosure requirements for crypto-assets, for their issuance and admission to the trading market. Furthermore, MiCA shall guarantee authorization and supervision policies for the service providers and issuers of Asset-Referenced Tokens (ART), Electronic Money Tokens (EMT), as well as other crypto-assets which do not belong to any of the two aforementioned categories of tokens. Professionals globally recognize it as the very first common licensing regime for crypto wallets and exchanges which shall be applicable across the EU.
The legal provisions for the Crypto-Asset Service Providers under new Regulation.
Crypto-asset services offered to EU customers are subject to the competent governmental authority of each Member State. An extensive list featured in MiCA has been inspired by the Directive 2014/65/EU, also referred to as MiFID II, and include the following:
- Trading platform operations of crypto-assets;
- Custody and administration services;
- Crypto-assets exchange for funds/crypto-assets for other crypto-assets;
- Third parties’ orders execution;
- Transfer of crypto-assets from one address and/or account to another;
- Advice on investment;
- Order reception and/or transmission;
- Placement services;
- Management of portfolios.
Cross-border activity, also referred to as “passporting”, is one of the key elements facilitated by MiCA, due to the fact that an authorization issued by a Members States’ local regulator allows operations all over the EU. In other words, a CASP licensed in one EU country shall hereinafter be able to duly and lawfully execute all necessary transactions in any other Member State, without the need of seeking any further authorizations. Thus, it shall turn the EU into a favorable ground for Crypto-Asset Service Providers (CASPs) who can operate on a rather global level. On the other hand, in terms of its’ application, MiCA solely concerns crypto-assets which are listed in the Regulation, meaning that any other financial instruments cover by MiFID II, such as deposits, structured deposits, funds under PSD II, insurance products, pension products, non-fungible tokens and decentralized finance (DeFI) are excluded.
A final question that has been brought before the European Securities and Markets Authority concerns the concept of “reverse solicitation”. While MiCA sheds light to this argument, the aforementioned authority is yet to provide the public with more specific guidelines. Thus far, according to the new Regulation, an authorization shall not be necessary in the following cases:
- In the event that a non-EU legal entity offers a crypto-asset service at the “own exclusive initiative” of a client based in the EU;
- In the event that such crypto-asset service exclusively concerns the service solicited by a specific client.
Regardless of the ex officio direct application of the text, due to its’ regulative nature, its’ interpretation and implementation shall nevertheless depend on each Member States’ regulator. MiCA shall be translated into the 24 official languages of the EU, while the voting procedure by the EU Parliaments’ plenary has been postponed to April of this year and is expected to enter into force 18 months later.
The present article is for informational purposes only and does not, under any circumstances, constitute legal advice. For further information on the subject, please contact our law firm and one of our attorneys shall be glad to assist you.
Nika Kalifatidou
Advocate – Legal Consultant
Managing Partner
T.K. & Associates Law Firm