The Markets in Crypto Assets Regulation (MiCAR) was finally published in the European Official Journal on 9 June 2023. When it enters into force on 29 June 2023, the European Union will finally have a uniform, directly applicable regulation on crypto assets.

MiCAR is the first regulation of its kind in the world. Its framework provides:

  1. Key legal definitions, including distributed ledger technology (DLT), crypto asset, utility token, asset-reference token, e-money token, crypto asset service (including a definition of each crypto asset service), crypto asset service provider, issuer, and offeror (of crypto asset), etc.
  2. Uniform authorisation requirements and procedures for crypto asset service providers (CASPs) regulated under MiCAR. This applies to all other crypto assets, except for those explicitly carved out, as listed below.
  3. Uniform passporting regime for CASPs authorised under MiCAR.
  4. Requirements for CASPs to be authorised under MiCAR. This includes requirements for the capitalisation, shareholders, management, internal governance and control, technology, etc.
  5. Requirements for provision of crypto asset services regulated under MiCAR.
  6. Requirements for issuers of crypto assets regulated under MiCAR, including the publication of a whitepaper and other.
  7. Requirements for issue, offering and admission to trading of crypto assets regulated under MiCAR and other rules aimed at investor protection.
  8. Rules for exercising supervision over CASPs, issuers of crypto assets, etc.
  9. Rules for prohibiting market abuse and manipulation.

MiCAR recognises that:

  1. Certain crypto assets qualify as financial instruments under the already existing MIFID II. They are regulated by MIFID II, MIFIR etc. Note: Estonian national law was amended already on 10 December 2022 to establish that MIFID II financial instruments may be also issued in DLT.
  2. E-money tokens shall be deemed as e-money and are also (in addition to MiCAR) regulated under the already existing E-Money Directive. Note: Estonian national law is not as explicit but is technology neutral.
  3. Crypto-assets that are unique and not fungible with other crypto-assets (NFTs) shall fall outside the scope of MiCAR (note: “unique and not fungible” does not depend on the name or branding of the token, but on the actual characteristics of the token).
  4. Crypto asset services can be provided in a fully decentralised manner without any intermediary (assessed case by case), in which case they don’t fall under MiCAR.
  5. Certain crypto assets can be issued without any identifiable issuer (assessed case by case), in which case MiCAR has limited applicability.

What’s next?

Various authorities (EBA, ESMA, etc.) are expected to issue several guidelines and technical standards. National laws must be amended where necessary.

MiCAR will enter into force as follows:

  1. A limited number of provisions on 29 June 2023.
  2. Provisions regulating asset-referenced tokens on 30 June 2024.
  3. Provisions regulating e-money tokens on 30 June 2024.
  4. Remaining provisions (including provisions regulating crypto assets service providers) on 30 December 2024.

Several exemptions are also provided, for example:

  1. Institutions with MiFID II authorisation will be able to continue to conduct business without having to obtain a separate authorisation under MiCAR. This applies where they only provide one or several crypto-asset services equivalent to the investment services for which they are authorised under MiFID II. Equivalence rules are provided in MiCAR.
  2. A grandfathering regime will be available for authorised e-money institutions. A simplified procedure for obtaining an authorisation will be offered.
  3. CASPs that provided their services in accordance with applicable national law before 30 December 2024 may continue to do so until 1 July 2026. These CASPs are allowed to provide services until they are granted or refused an authorisation under MiCAR. Note: Member States may decide not to apply the transitional regime or to reduce its duration. This option is possible where they consider that their national regulatory framework applicable before 30 December 2024 is less strict than MiCAR.
  4. Member States may apply a simplified procedure for authorization applications. This applies to those that are submitted between 30 December 2024 and 1 July 2026 by entities that on 30 December 2024 were authorised to provide crypto asset services.

Please note that MiCAR should not be perceived as a standalone regulation. The European Commission has an additional digital finance strategy. A complete Anti-Money Laundering package is also in the works. A DLT Pilot Regime and the Digital Operational Resilience Act (DORA) are also in effect.

Still have questions on the impact of this new crypto asset regulation on your business? Contact our experienced and knowledgeable legal crypto experts. If you are in Estonia, contact Hetti Lump or Krista Ševerev. Latvian companies should contact Agneta Rumpa, while Lithuanian companies should contact Akvilė Jurkaitytė.