MiCA Regulation comes into force

On June 9, 2023, the Markets in Crypto Assets Regulation (MiCA) was published in the Official Journal of the European Union – the Regulation will come into force on June 20, 2023, but the first batch of regulation will take effect on June 30, 2024, the second batch of regulation will take effect on Decemebr 30, 2024. The MiCA Regulation is intended to provide a comprehensive regulatory framework for the cryptocurrency industry in the European Union (EU).

What is the subject of MiCA?

The MiCA Regulation classifies crypto assets into three categories:

1. E-money tokens (EMT) – digital representations of fiat currency, so-called stablecoins, backed by a central bank or other financial institution. EMTs that hold the value of EU fiat currency will be considered electronic money under the Electronic Money Directive (“EMD2”).
2. Asset-referenced tokens (ART) – digital assets that claim to keep a fixed value by being tied to some other asset or right, which can include official national currencies. This category includes stablecoins that are supported by multiple fiat currencies, as well as those backed by cryptocurrencies or commodities tha can be traded.
3. Utility tokens – tokens that are not qualified as EMTs or ARTs, but are used to access a specific product or service, such as software or a platform, and do not have any value.

Who will be bound by MiCA’s regulations?

Entities that issue or provide services related to crypto assets will be obliged to act in compliance with the MiCA Regulation. This includes entities such as crypto exchanges, wallet providers, and Initial Coin Offering (ICO) issuers. The Regulation also applies to entities that custody or hold crypto assets on behalf of others, such as custodial wallets or security token issuers.

What are the new obligations?

First of all, to engage in activities involving crypto assets, it will be necessary to obtain a permit and be enlisted on the register conducted by the European Securities and Markets Authority (ESMA), as this will be a regulated activity. This permit will be recognized in all EU member states and will allow service providers to offer their services across the EU, utilizing the freedom of enterprise, either through a branch or by exercising the freedom to provide services.

There will also be a need to adopt and implement all relevant internal policies. To comply with regulations, companies must establish internal policies and procedures that ensure compliance among managers and employees. This includes creating business continuity plans, governance policies, and complaint management procedures. Depending on the type of asset, companies may need to establish crypto-specific policies and procedures, such as validating transactions and ensuring liquidity. All companies must have procedures in place to protect consumers and investors, including Anti-Money Laundering (AML), Know Your Customer (KYC), and anti-terrorist financing control mechanisms.

Publishing Whitepapers – All crypto asset issuers will have to publish a so-called “whitepaper”, which describes the technological and economic characteristics of each asset.

“Travel Rule”

Along with the adoption of MiCA, the European Parliament also passed the “Regulation on information accompanying transfers of funds and certain crypto-assets.” According to this act, cryptographic transactions in the EU will need to include identification data without any minimum transaction threshold. Crypto Asset Service Providers (CASP), such as currency exchange offices, stock exchanges, and other companies, will have to collect personal data about the owners of public addresses where cryptocurrencies are sent.

When will MiCA come into force?

The MiCA Regulation will come into effect on June 20, 2023, while the new regulations will not actually take effect until next year. EMT and ART regulations will take effect on June 30, 2024, by which time the European Banking Authority (EBA) is expected to issue guidelines and regulatory technical standards in this regard.

As of December 30, 2024, regulations will apply to crypto asset service providers. It is assumed that entities previously listed in the Polish Register of Virtual Currency Activities will automatically become crypto asset service providers within the meaning of the MiCA.