The Markets in Crypto-Assets Regulation (MiCAR) aims to promote an innovative crypto ecosystem in the EU. It regulates selected crypto-assets and their service providers to ensure legal certainty and financial stability for consumers and potential investors. MiCAR covers crypto-assets not previously covered by existing EU financial regulation and affects both issuers of crypto-assets and providers of crypto-asset services.
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MiCAR came into force on 29 June 2023. The provisions for value-based tokens (ARTs) and electronic money tokens (EMTs) will apply from June 2024, while the remaining provisions will come into force from December 2024. MiCAR will be fully binding and directly applicable in all EU Member States.
Delegated acts, technical standards and additional directives
The European Commission has the power to adopt delegated acts for a period of 36 months from 29 June 2023. These legal acts specify, among other things, the procedural rules for imposing fines and the criteria for classifying ARTs and EMTs. In addition, the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) are developing regulatory technical standards (RTS) and guidelines for MiCAR. These standards and guidelines cover a wide range of topics, including the authorisation of crypto-asset service providers, complaints management and sustainability indicators.
Area of application of MiCAR
MiCAR provides the first legal framework for the crypto-asset ecosystem within the EU. It applies to persons involved in the issuance, offering and admission to trading of crypto-assets or providing crypto-asset services. Fully decentralised crypto-asset services without intermediaries are not covered by MiCAR. However, partially decentralised services are regulated.
Definition and categories of crypto assets
MiCAR defines crypto-assets as a “digital representation of a value or right that can be transferred and stored electronically using distributed ledger technology or similar technology”. This definition includes three main types of crypto-assets:
- Asset-referenced tokens (ARTs): These tokens are designed to maintain a stable value by referencing the value of one or more official currencies or other assets.
- Electronic money tokens (EMTs): These tokens represent the value of an official currency and function similarly to electronic money.
- Other crypto-assets: This category includes all crypto-assets that cannot be classified as ARTs or EMTs. This also includes utility tokens that enable access to certain goods or services.
Issuance and offering of crypto assets under MiCAR
Issuers and providers of crypto-assets must fulfil certain requirements, including the preparation, publication and submission of a crypto-asset whitepaper to the competent authorities. This whitepaper must contain detailed information about the project, the people involved and the technological basis. Issuers must also ensure that their communications are clear, fair and not misleading.
Crypto-asset service providers (CASPs)
Crypto-asset service providers must apply for authorisation from the EU’s national supervisory authorities and fulfil the requirements of MiCAR. Among other things, this includes requirements for governance, system security and the protection of client assets. CASPs must operate at least partly in an EU member state and have their registered office in the EU. There is also a simplified authorisation procedure for already regulated financial institutions.
Authorisation
The national supervisory authorities are authorised to grant, refuse or withdraw authorisation and monitor the activities of CASPs. Potential CASPs must undergo a detailed application process and fulfil the specific information requirements and standards of MiCAR. The CASP authorisation granted is valid throughout the EU.
Simplified authorisation procedure
MiCAR offers a simplified authorisation procedure for financial institutions already regulated under national law. They can submit a simplified application between 30 December 2024 and 1 July 2026. The national supervisory authorities will check whether the applicants fulfil the general and specific requirements of MiCAR.
Notification procedure
Certain financial institutions that are already regulated at EU level and wish to offer crypto-asset services can use the notification procedure under Article 60 MiCAR. This option is open to the following institutions:
- Credit institutions
- Central securities depositories
- Investment firms
- Electronic money institutions
- Management companies for UCITS
- Alternative investment fund manager
- Market operator
If these companies wish to provide crypto-asset services under MiCAR, they must notify the competent authority of the intended activities 40 working days before the start of the activity and submit the relevant information. The competent authority will check within 20 working days of receiving the notification whether all the necessary information has been provided. If information is missing, a deadline will be set for subsequent submission. Without complete notification, the crypto-asset service providers may not commence the intended MiCAR activities. It should be noted that these entities must nevertheless fulfil most of the general and specific obligations of CASPs under MiCAR.
Reverse solicitation
Third country firms do not need to be authorised under MiCAR when a client based in the EU requests a crypto-asset service on their own initiative. ESMA has already published draft guidelines providing details on this principle and how it will be applied by regulators. It is important that all the facts and circumstances of the case are taken into account in order to assess whether a third country firm is approaching EU clients.
Conclusion
The legal framework for crypto-assets through MiCAR marks a significant step towards a stable and innovative crypto-ecosystem in the EU. In future, market participants will benefit from standardised regulations that create legal clarity and security. Despite this positive outlook, it remains to be seen how the regulation will prove itself in practice. The coming years will show to what extent MiCAR fulfils the requirements and what adjustments may be necessary to meet the dynamic developments in the crypto sector. With MiCAR, however, the EU is well equipped to successfully master the opportunities and challenges of the crypto world.
