What is MiCA?

The EU's Market for Crypto Assets (MiCA) Regulation is the world's first comprehensive legal framework for the issuance and trading of crypto assets. MiCA is a regulatory milestone that creates a transparent and secure investment environment for the EU crypto industry.

MiCA's main objectives include:

Replace separate regulations from multiple EU countries and establish a unified and comprehensive framework

Making clearer rules for crypto asset service providers and token issuers

Provide greater certainty in the regulation of crypto assets not covered by current financial regulations

MiCA's regulatory scope?

Under the MiCA Act, the regulated targets are Crypto Asset Service Providers (CASPs), which include:

Escrow Wallet

Exchange between cryptocurrency and fiat currency

Cryptocurrency Trading Platform

Execute crypto asset orders on behalf of customers

Receive and transmit orders for crypto assets on behalf of customers

Crypto Asset Advisory Firm and Crypto Portfolio Management Firm

In terms of crypto assets, MiCA covers three types of assets:

An asset reference token (asset-referenced token) is a stable currency backed by one or more assets that maintain a stable value.

An electronic currency token (electronic money token) is a stable currency backed by an official legal tender.

Other tokens, including functional tokens

Which objects are not within the scope of supervision?

MiCA explicitly excludes crypto assets that are unique and irreplaceable, so most NFTs are outside its regulatory scope. However, MiCA may be applicable to some more alternative NFTs (e. g. NFTs released in series or collections).

Fully decentralized crypto assets are not regulated by MiCA. Thus, for example, the world's most well-known Bitcoin itself is not subject to MiCA regulations.

In addition, MiCA does not apply to the following asset types:

Financial instruments;

deposits, including structured deposits;

funds (unless they are considered electronic currency tokens);

Unique assets that are different from other crypto assets (as mentioned earlier, contain certain NFTs);

non-life or life insurance products;

Social Security Program.

Who is in charge of supervision?

Under the MiCA framework, the European Securities and Markets Authority (ESMA) plays a key role in interpreting the provisions and ensuring consistent application across EU member states. ESMA is responsible for setting regulatory technical standards, providing guidance, and overseeing the implementation of MiCA to ensure that Crypto Asset Service Providers (CASP) comply with the rules and maintain market integrity in the EU's crypto asset industry.

Although the National Competent Authority (NCA) is responsible for overseeing CASP applications and authorisations, ESMA will work with the NCA during the transition period to adopt a consistent approach to authorisations to ensure consistency in regulatory expectations within the European Economic Area.

The NCA is responsible for reviewing the CASP application and deciding whether it is approved. After the adoption, the NCA will inform ESMA of the results, and ESMA will then register the publication.

When will the MiCA come into force?

mica regulation

The MiCA regulations related to stablecoins (Chapters III and IV) will enter into force on June 30, 2024, and the remaining MiCA provisions will enter into force on December 30, 2024.

What is the transition period?

The transition period is the period during which existing virtual asset service providers (VASPs), or companies that will become VASPs during the transition period, are able to operate as virtual asset service providers in accordance with the laws of the countries in which they are located. In the meantime, countries should harmonize their national laws with the provisions of MiCA. Member States can choose not to implement this transition period, or shorten the transition period. ESMA recommends that the transition period should not exceed 12 months.