MiCA Regulation: A New EU Framework for Crypto-Asset Service Providers
The European Union’s (EU) Markets in Crypto-Assets (MiCA) regulation is a comprehensive framework designed to regulate crypto-asset service providers (CASP). The regulation aims to ensure consumer protection, prevent market abuse, and promote transparency and accountability within the crypto-asset sector.
New Regulatory Framework
The MiCA regulation introduces a new EU-wide authorization and supervision regime for CASPs. Existing CASPs will be subject to these new rules within 18 months.
- EU-wide Authorization: CASPs must obtain an EU-wide license to operate in the EU.
- Supervision: CASPs will be supervised by regulatory authorities, ensuring compliance with MiCA regulations.
Requirements for Local Substance
To maintain a presence in the EU, CASPs must:
- Have at least one senior manager based in the country of establishment
- Organize activities through a place of business within the EU
Provision of Financial Services
CASP will be considered providers of financial services, subject to consumer protection rules. This includes providing clear, fair, and non-misleading information about risks associated with crypto-assets.
Capital Requirements
CASP must meet minimal capital requirements:
- €50,000 to €150,000
- Similar monitoring of own funds as for other financial market participants
Requirements for UBOs, Shareholders, Senior Management, and Employees
To ensure good repute and fitness and properness, the following individuals must be scrutinized:
- Ultimate beneficial owners (UBOs)
- Shareholders
- Senior management
- Employees
Supervisory authorities can consult with each other inside the EU, including financial intelligence units (FIUs).
Internal Policies and Governance Principles
CASP must establish internal processes similar to those of other institutions under financial supervision. This includes policies on:
- Anti-money laundering/counter-terrorism financing (AML/CTF)
- Data protection
- Risk management
- Consumer protection
- Safeguarding
- Business continuity
- Avoiding conflict of interest
Passporting and Foreign Customers Solicitation
The passporting regime allows CASPs to offer services across the EU from one jurisdiction. This provides clarity for providers offering services to EU customers at their own initiative.
Requirement to Start Activity and Ensure Continuity
CASP must:
- Start activity within 12 months
- Prohibit stopping activity for more than 9 months with an active license
Prevention and Prohibition of Market Abuse
Rules established to prevent market abuse, including disclosure of inside information and market manipulation (similar to other financial markets).
EU-wide Register by ESMA
ESMA will establish a publicly available register containing information about issuers of crypto-assets and CASPs registered and authorized to operate on the EU market.
Penalties
Higher penalties thresholds:
- At least €5,000,000 in flat sums
- From 3% to 12.5% of total annual turnover (depending on the scope of violation)
The MiCA regulation aims to establish a comprehensive regulatory framework for CASPs, ensuring consumer protection, preventing market abuse, and promoting transparency and accountability within the crypto-asset sector.