Europe greenlights MiCA and TFR regulations for e-money tokens and cryptocurrency assets
On April 20, 2023, the European Parliament ratified the Markets in Crypto Assets Regulation (MiCA) alongside the Regulation on Information accompanying Transfers of Funds and Certain Crypto-Assets (TFR).
MiCA establishes a cohesive regulatory framework for cryptocurrency assets and associated activities and services, applicable to both individuals and legal entities involved in the issuance, public offering, or trading of crypto-assets, as well as related services within the European Union (EU), referred to as crypto-asset service providers (CASPs).
However, MiCA does not extend to those offering crypto-asset services solely to their parent or subsidiary companies. Additionally, the regulation does not cover unique non-fungible tokens (NFTs). Fractional NFTs and CASPs providing NFT services are still governed by MiCA. Arrangements in Decentralised Finance (DeFi) that facilitate crypto-asset services in a completely decentralised fashion fall outside MiCA’s parameters. Lending and borrowing practices in crypto-assets are not regulated by MiCA.
Crypto-assets represent digital values or rights that can be electronically transferred and stored utilizing distributed ledger technology or similar means. MiCA classifies crypto-assets into three categories, with varying requirements based on associated risks:
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e-Money Tokens – A category of crypto-assets that claims to maintain a stable value by referencing the value of an official currency.
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Asset-Referenced Tokens – A type of crypto-asset aiming to maintain a stable value by referencing various values or rights, including official currencies.
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All Other Crypto-assets – This includes all crypto-assets not classified as asset-referenced tokens or e-money tokens, such as utility tokens, which serve solely to grant access to goods or services supplied by the token issuer.
MiCA prohibits entities from marketing crypto-assets to the public, excluding asset-referenced and e-money tokens, or seeking to list these assets on trading platforms unless specific criteria are fulfilled. CASPs must adhere to conduct, prudential, and governance regulations, including outsourcing, conflict of interest, and asset protection rules. EU individuals are restricted from offering crypto-asset services without authorization as a CASP, which allows them to operate throughout the EU.
MiCA also features provisions allowing third-party firms from non-EU countries to provide crypto-asset services to EU clients without CASP authorization, as long as the client initiates the service. However, if the third-party firm actively seeks EU clients, they will require CASP authorization.
Both regulations are anticipated to be published in the Official Journal by the end of June 2023, with enforcement starting in July 2023. Regulations governing stablecoins under MiCA will come into effect in July 2024, while the remaining provisions of MiCA and TFR will take effect in January 2025.
www.globalstablecoins.co.uk
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