On the 5th of October 2022, the Markets in Crypto Assets Regulation (“MiCA”) has moved a little closer to adoption by the European institutions.
Indeed, the European Council approved the final version of MiCA. There is still a last step before the text is officially adopted in its current form: the approval of the European Parliament's Economic Affairs Committee. This vote will take place on the 10th October 2022 (between 16h00 and 18h00).
After this vote, MiCA will be translated in every official language of the European Union and then published in the Official Journal. As from this date, the countdown of 12 (for e-money and asset-referenced token legislation; also know as ‘stablecoins’) to 18 months (for the rest of the text) to its implementation will begin. Since the text is currently more than 350 pages long (to be translated in the 23 other official languages), we estimate that MiCA will be applicable around Q1/Q2 2024.
Crypto Asset Service Provider (“CASPs”) registered with an EU regulator will have a further 18 months to comply with MiCA, which could be a strategic move for the companies still hesitating.
As a reminder, MiCA introduces the first regulatory regime for crypto wallets and exchanges to operate. In particular, MiCA foresees licensing requirements across the 27 EU Member States, including a need for checking user identity.
MiCA distinguishes between two different types of CASPs, which are therefore providers of services on crypto-assets: (i) the ‘classic CASPs’ and (ii) the ‘significant CASPs’. The latter being those with an annual user base of more than 15 million and they will be subject to stricter rules regarding anti money laundering and terrorist financing as well as minimum capital requirements.
While the previous drafts of MiCA have long ignored stablecoins, they are omnipresent in the final version of the text. The collapse of Terra and its tokens LUNA and UST probably had a considerable impact on the legislator in this regard. CAPs will be required to comply with specific ratio and have deposits of fiat money as to allow users to be reimbursed if they want to.
The overall objective of this European Regulation is to protect (novice) investors against certain risks associated with investments in crypto-assets and to avoid fraudulent schemes.
NFTs (including digital art) are still not covered in MiCA unless they qualify as a financial instrument or as a crypto asset. On this point, MiCA opens the doors to a whole new level of “fungible” NFTs (see recital 6c). NFTs are normally non-fungible tokens but fractions of those NFTs may, according to MiCA, be considered as fungible. The least we can say is that we are curious to see how those fungible NFTs will be treated legally.