Digital Finance: Agreement Reached on European Crypto-Assets Regulation

The EU brings crypto-assets, crypto-assets issuers and crypto-asset service providers under a regulatory framework for the first time.

The Council presidency and the European Parliament reached a provisional agreement on the markets in crypto-assets (“MiCA”) proposal which covers issuers of unbacked crypto-assets, and so-called “stablecoins”, as well as the trading venues and the wallets where crypto-assets are held.

This regulatory framework will protect investors and preserve financial stability, while allowing innovation and fostering the attractiveness of the crypto-asset sector.

MiCA will protect consumers against some of the risks associated with the investment in crypto-assets, and help them avoid fraudulent schemes. With the new rules, crypto-asset service providers will have to respect strong requirements to protect consumers wallets and become liable in case they lose investors’ crypto-assets.

Actors in the crypto-assets market will be required to declare information on their environmental and climate footprint.

To avoid any overlaps with updated legislation on anti-money laundering (AML), which will now also cover crypto-assets, MiCA does not duplicate the anti-money laundering provisions as set out in the newly updated transfer of funds rules agreed on 29 June. However, MiCA requires that the European Banking Authority (“EBA”) will be tasked with maintaining a public register of non-compliant crypto-asset service providers.

MiCA will protect consumers by requesting stablecoins issuers to build up a sufficiently liquid reserve, with a 1/1 ratio and partly in the form of deposits. Every so-called “stablecoin” holder will be offered a claim at any time and free of charge by the issuer, and the rules governing the operation of the reserve will also provide for an adequate minimum liquidity.

The development of asset-referenced tokens (ARTs) based on a non-European currency, as a widely used means of payment, will be constrained to preserve our monetary sovereignty. Issuers of ARTs will need to have a registered office in the EU to ensure the proper supervision and monitoring of offers to the public of asset-referenced tokens.

Under the provisional agreement crypto-asset service providers (CASPs) will need an authorisation in order to operate within the EU.

Non-fungible tokens (NFTs), i. e. digital assets representing real objects like art, music and videos, will be excluded from the scope except if they fall under existing crypto-asset categories.

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

You can reach further information here.

Kind regards,

Zumbul Attorneys at Law