Markets in Crypto-Assets (MiCA/MiCAR)

With Regulation of the European Parliament and of the Council on Markets in Crypto-assets, and amending Regulations (EU) No 1093/2010 and (EU) No 1095/2010 and Directives 2013/36/EU and (EU) 2019/1937 (“MiCAR”), the European Union is adopting for the first time a harmonised regulatory framework for the crypto-asset market which applies to both traditional institutions of the financial sector and new players emerging in the crypto ecosystem. These entities must meet a set of specific requirements to benefit from a regulated status recognised at European level.

MiCAR is part of the Digital Finance Package published by the European Commission on 24 September 2020 which includes other regulatory initiatives such as the Pilot Regime for market infrastructures based on distributed ledger technology (Regulation (EU) 2022/858) and DORA (Regulation (EU) 2022/2554).

By adopting MiCAR, the EU aims to bring legal certainty to the crypto-asset ecosystem and support innovation while safeguarding consumer protection, markets integrity and financial stability.
To this end, the EU establishes a harmonised framework for the issuance, offer to the public, admission to trading and provision of services related to crypto-assets in the Union.

MiCAR creates a bespoke regime for crypto-assets that are not already covered in European financial services legislation and groups them into three main categories: asset-referenced tokens (“ART”), e-money tokens (“EMT”), and other crypto-assets.

The extent of the requirements to which issuers of crypto-assets are subject depends on this classification. For example, all tokens require the notification of a white paper, whilst only ART and EMT issuers require prior approval.

Crypto-asset service providers (“CASP”) are subject to an authorisation regime involving notably prudential and organisational requirements and consequently will be subject to a supervisory regime by the CSSF. Certain categories of entities that already have a regulated status (e.g. credit institutions, investment firms) can provide certain services on crypto-assets upon a simple notification.

The types of services that fall under the scope of MiCAR are:

• Custody and administration of crypto-assets on behalf of clients,
• Operation of a trading platform for crypto-assets,
• Exchange of crypto-assets for funds,
• Exchange of crypto-assets for other crypto-assets,
• Execution of orders for crypto-assets on behalf of clients,
• Placement of crypto-assets,
• Reception and transmission of orders for crypto-assets on behalf of clients,
• Provision of advice on crypto-assets,
• Portfolio management on crypto-assets,
• Transfer services for crypto-assets on behalf of clients.

MiCAR entered into force on 29 June 2023 and it will applies:

• On 30 June 2024 (12 months after its entry into force) regarding the provisions of Titles III and IV of the regulation relating to the authorization and supervision of ART/EMT,
• On 30 December 2024 (18 months after its entry into force) for the rest of the provisions provided for by the regulation, in particular on CASP.

The CSSF is closely following the final steps of the adoption of MiCAR and will keep the financial sector informed of the practical implications including the procedures resulting from the regulation.

The CSSF expects any person who intends to commence ART/EMT activities to comply fully with MiCAR as from 30 June 2024.

Issuers who have issued ARTs in accordance with applicable law prior to 30 June 2024 may continue to do so in accordance with the transitional arrangements set out in Article 143(4) and (5) MiCAR. No similar transitional arrangement applies for EMTs.

The regulatory and implementing technical standards and guidelines applicable to such activities are available on the EBA’s website.

The EBA urges issuers and offerors to have regard to these documents and adjust as if those measures were fully applicable, in the case of technical standards pending their adoption by the European Commission and publication in the Official Journal of the European Union. This includes measures relating to white papers, governance, complaints handling, own funds, reserve assets, recovery and redemption plans.

All stakeholders providing services related to crypto-assets (exchange, transfer, etc.) should be aware that as from 30 June 2024, all persons carrying out ART/EMT activities should comply with MiCAR.

This means that stakeholders should set up as soon as possible procedures in order to assess compliance with MiCAR of ARTs/EMTs for which they offer related services and should refrain, as from 30 June 2024, from carrying out services that constitute offering to the public, seeking admission to trading or placing non-compliant ARTs/EMTs.