Provisional agreement on the markets in crypto-assets (MiCA)

Following the adoption by the Economic and Monetary Affairs Committee of new rules relating to crypto-assets on March 14 a new step was reached with a provisional agreement reached on June 30, 2022 between the Presidency of the Council and the European Parliament regarding the proposal on crypto-asset markets (MiCA) industrial and digital sovereignty. Bruno Lemaire who then headed the Economic and Financial Affairs Council (ECOFIN) said "this landmark regulation will put an end to the crypto wild west and confirms the EU’s role as a standard-setter for digital topics”.

What changes?

The new regulatory framework will require that crypto-asset service providers need authorisation to operate within the EU. The financial regulatory authorities of each Member State will have three months after the registration file to issue the authorisation to operate in their country. This passporting mechanism will enable service providers to develop their activities in other Member States.

From a compliance perspective, the MiCA regulation specifies that the European Banking Authority (EBA) will be responsible for keeping a public register of non-compliant crypto-asset service providers in the fight against money laundering. In addition, MiCA will interface with other anti-financial crime provisions and in particular the new EU anti-money laundering package and the proposal to redesign of “TFR” (Transfer of Funds Regulation). As such, Crypto-Asset Service Providers (CASPs) will be required to provide the so-called Travel Rules information (source and beneficiary of the asset) to the competent authorities in the event of an investigation for money laundering and terrorist financing. In order to prevent crypto-asset transactions from easily avoiding existing thresholds that would trigger traceability requirements, the TFR will not provide for minimum thresholds or exceptions for transfers of a small amount more if a customer sends or receives more than 1,000 euros to or from its own non-hosted wallet, the service provider must verify whether it is actually owned or controlled by this client.
CASPs will also be required to report information about their environmental and climate footprint. The European Securities and Markets Authority (ESMA) will develop draft regulatory technical standards on the content, methods and presentation of information relating to the main negative environmental and climate impacts.

Finally, one of the cornerstones of MiCA will be to require crypto-asset service providers to comply with strong consumer protection requirements, and their liability will now be engaged in the event of the loss of crypto-assets belonging to investors.

The MiCA regulation will also protect consumers by requiring issuers of "stablecoins" to build up a sufficiently liquid reserve, with a ratio of 1:1 and partly in the form of deposits. Each holder of so-called "stablecoins" will be able to be reimbursed at any time and free of charge by the issuer, and the rules governing the operation of the reserves will also provide for an adequate minimum liquidity.

Next steps

The provisional agreement is subject to the approval of the Council and the European Parliament before going through the formal adoption procedure.