What is the Markets in the Crypto Assets Regulation (MiCA)?

The Markets in Crypto Assets Regulation (MiCA) is the EU’s answer to a legal framework for cryptocurrency asset regulation. Established in September 2020, the regulation aims to create innovation and fairer market conditions in a category of asset (cryptocurrency) that was previously undefined and unregulated.

Purpose of MiCA

The Markets in Crypto Assets Regulation has been introduced to offer a definitive guide around the provision of cryptocurrency services. The pace of innovation and new technology for cryptocurrency means that it has remained broadly unregulated in many jurisdictions.

While older regulations fit traditional assets, there were – and remain – many gaps for cryptocurrency operators. For example, traditional regulation states that licensing is the responsibility of banks, but cryptocurrency is decentralised – which means it is not governed by a bank and it is not always possible to determine ownership of such assets. So, while some existing regulations are being applied to crypto, MiCA offers to introduce an overarching framework.

As well as looking to offer consumer protections and stabilise the market, MiCA exists to develop the industry’s innovation and competition. With stricter controls around licensing and operations, cryptocurrency trading platforms or exchanges are obliged to adapt their workflows and diversification strategies. 

Objectives of MiCA

There are four key objectives for the Markets in Crypto Assets Regulation:

1. Provide legal credibility for cryptocurrency regulation
   
   
2. Develop the market through competition
   
   
3. Protect market integrity by safeguarding investors and consumers
   
   
4. Create an environment for financial stability in the market

To achieve these objectives, there are several sets of rules permitted to different types of organisations. Those who issue assets to third parties are now subject to gaining authorisation from ESMA, and must also publish a whitepaper, for example.

Alternatively, cryptocurrency asset service providers must gain a licence from the European Banking Authority, and satisfy prudential rules while they operate. These objectives aim to harmonise the introduction of EU-wide cryptocurrency regulations where previously, discrepancies in global standards have held regulators back. 

Who must comply?

The Markets in Crypto Assets Regulation applies to any cryptocurrency-associated company or individual that wants to offer their coins, assets or services in Europe. The scope involves several categories of agents, including custodians and administrative services in the cryptocurrency industry. Moreover, all trading platforms, exchanges (whether fiat to crypto or crypto to crypto), and asset issuers are subjected to the Markets in Crypto Assets Regulation. 

Since this regulation won’t be fully integrated until 2024, we don’t yet know about the consequences of non-compliance. However, time is swiftly running out for crypto-related firms to ensure their company is operating within the lines of regulation.

Ensure your firm is ready to comply, with CUBE.