MiCA Is Right Around The Corner, What Are The Key Regulations

The European Union may soon put into motion its Markets in Crypto-Assets Regulation (MiCA) framework, which would be the first such regulatory act at this scale.

The new regulatory framework, scheduled for voting in the European Parliament in April 2023, would cover three main types of Crypto-Assets - asset-referenced tokens (ARTs), e-money tokens (EMTs), and other crypto-assets (a catch-all category for tokens that are not ARTs or EMTs).

MiCA lays the groundwork for Europe to set itself on the crypto map as a desirable hub for worldwide operations for crypto-asset service providers (CASPs).

MiCA will be directly applicable across all EU member states, including Malta, as a result of the EU choosing the regulation route over implementing a directive, and will not require additional implementation at a national level.

The CASPs framework

A CASP will need to be approved by the relevant authorities in its resident EU member state if it plans to offer crypto-asset services to EU customers. If a crypto service provider plans to offer services that include crypto assets to clients in the EU, they must be authorized under MiCA. Those services include administration and custody services, running trading platforms for cryptocurrency assets, trading cryptocurrency assets for cash or other cryptocurrency assets, and more.

The services also include carrying out directives on another party's behalf (custodial wallets), placement assistance, moving cryptos from one address or account to another, financial guidance, and portfolio management.

Key MiCA features

MiCA establishes guidelines for CASPs, including standards for governance, capital, insurance, and transparency.

When compared to the €750,000 minimum capital requirement that is applicable under the MiFID II directive, for the provision of similar service types, EU legislators have now chosen a €150,000 minimum capital requirement for the major CASP players despite crypto assets being frequently considered as a riskier asset class than traditional financial instruments in terms of transparency, money laundering, or market volatility.

The ability to "passport" throughout the EU via a physical branch or on a cross-border basis is among MiCA's main characteristics, which is that authorization by the home member state regulator.

However, there are already some companies that underwent a licensing procedure under their respective regulatory regimes, that may provide crypto-asset services without authorization under MiCA. This means that crypto asset providers may choose to stick with their MiFID legislations rather than go through another set of regulatory approval.

When would MiCA take effect?

MiCA's birth date is almost approaching, with experts considering whether the legislation will have an impact on your business with EU clients or not. The MiCA vote in the EU Parliament's plenary is scheduled for April 2023. If approved, MiCA should go into effect after a 12-month transition time for stablecoin issuers (Q2 2024) and after an 18-month transition period for CASPs (Q4 2024).