What Is Markets in Crypto-Assets (MiCA)? (2024)

What Is Markets in Crypto-Assets (MiCA)?

The Markets in Crypto-Assets (MiCA) regulation is a landmark framework created by the European Commission (EC) that focuses on maintaining financial stability. It also is designed to protect investors and promote widespread transformation in the crypto asset sector in European Union (EU) countries.

Key Takeaways

The Markets in Crypto-Assets (MiCA) regulation is a regulatory framework created by the European Union.
MiCA entered the Official Journal of the European Union in June 2023, with consultation packages released for public feedback at intervals.
Titles III (concerning asset-referenced tokens) and IV (concerning e-money tokens) became applicable in June 2024.
MiCA entered into force in June 2023, but the regulation will not be fully applied until December 2024.

History of Markets in Crypto-Assets (MiCA)

On Oct. 10, 2022, the EC’sEconomic and Monetary Affairs Committee overwhelmingly voted (28 to one) to approve the first-ever blockchain-related asset regulation, paving the way for a vote by the full European Parliament before the end of 2022. The bloc’s national governments had previously signed off on MiCA.

The regulation entered into force (became law) in June 2023, although three consultation packages were released for public feedback. On June 30, 2024, Title III and Title IV became applicable (can be enforced), with five more Titles (I, II, V, VI, VII) applying in December 2024. Titles VIII and IX deal with delegated acts and transitional and final provisions, which do not require public feedback or Member State adjustment periods.

What Is Markets in Crypto-Assets (MiCA)? (1)

The law allows providers of digital wallets and other crypto services to market and sell across the EU bloc if they register with national authorities. They must also satisfy minimum guarantees to safeguard investors and sustain financial steadiness.

Markets in Crypto-Assets Titles

MiCA has seven titles that address crypto-asset regulation, authorization, minimum requirements for providers, and jurisdiction responsibilities. The regulation defines three types of crypto-assets: asset-referenced tokens, e-money tokens, and crypto-assets other than the previous two.

Markets in Crypto-Assets Title I

Title I, Article 1 defines offering and trading platform requirements for publicly offered crypto-assets and entities involved in them. Article 2 defines who the regulation applies to, and Article 3 lists definitions of all terms used in the legislation, such as distributed ledger technology, utility token, consensus mechanism, crypto-asset service, and dozens of others.

Markets in Crypto-Assets Title II

Title II details who can create and offer a crypto-asset to the public. An entity that creates and plans to issue a crypto-asset that doesn't meet the definition of an asset-referenced token or e-money token must meet specific criteria. An entity must:

Meet the definition of a legal person
Have written and published a crypto-asset whitepaper
Have written and published marketing communications
Notify the proper authorities in their member state and submit the whitepaper (required) and marketing communications (if requested)
Comply with other offerer requirements

These criteria don't apply to tokens rewarded for work done on a blockchain if the crypto-asset is offered for free. If it is a token intended to be used as a payment method or if it is a utility token, it is not considered a crypto-asset.

Critical to this title are the articles that outline what must be included in whitepapers and marketing communications for an entity to attempt to get a crypto-asset listed on a trading platform.

Markets in Crypto-Assets Title III

Title III defines asset-referenced tokens, which, by the EU's definition, are tokens that try to stabilize their value using the value of another asset or right. This covers all crypto-assets whose value is tied to or backed by other assets, such as officially backed currencies like the euro or the dollar—many people call this a stablecoin.

Asset-referenced tokens must be issued by an entity that meets the definition of a legal person and be a credit institution, which must follow specific requirements for its issuance.

Markets in Crypto-Assets Title IV

Title IV defines who can issue e-money tokens. E-money tokens are "electronic money," referring to crypto-assets that represent official currencies. Issuers must be authorized credit or electronic money institutions. This Title also discusses how e-money can be issued and redeemed and how to write a whitepaper. It also defines the liabilities money issuers take on when offering an e-money token to the public.

Title IV includes trading platform rules that do not allow tokens with built-in anonymization techniques to be traded unless the traders and transactions are identified. This is not a ban on privacy tokens; it only prevents anonymous transactions from occurring on registered exchanges.

Markets in Crypto-Assets Title V

Title V outlines who is authorized to provide crypto-asset services and where they can provide them based on their location within the Union. The law allows the following entities to offer services:

Credit institutions
Central securities depositories
Investment firms
Market operators
Electronic money institutions
Undertakings for Collective Investment in Transferrable Securities (UCITS) management companies
Approved alternative investment fund managers

If a service provider does not meet the definition of a legal person, they are allowed to offer services if they are operating under a legal form that provides the same level of protection as those that do. A business must also comply with several provisions and ensure it is authorized and licensed in its Member State.

In the EU and many developed countries, a legal person is a business, individual, or organization that the law treats as a person. An entity that engages in activities a human can engage in (paying taxes, owning property, entering contracts, and so on) is a legal person in the eyes of the law.

This Title also allows service providers to provide cross-border services if they have informed the proper authorities in their Member State. It also defines obligations to clients and outlines security, governance, and operational requirements.

Markets in Crypto-Assets Title VI

Title VI is one of the shorter titles in the legislation. It addresses market abuse concerns and the scope of abuses the title covers. Other standard investment rules, such as public disclosure of inside information, insider trading, and market manipulation, are also outlined.

Markets in Crypto-Assets Title VII

This title issues instructions for authorities and lays out a cooperative framework between jurisdictions. Member States are required to appoint competent authorities and ensure they report to the European Banking Authority (EBA) and European Securities and Markets Authority (ESMA).

In addition to any powers Member States grant their regulators, the EU included minimum powers that all authorities within the union should have in this section.

MiCA Exclusions

One of the more interesting aspects of MiCA is that several blockchain-related assets are not considered crypto-assets, at least as far as falling under any definitions set in this legislation. For example, it mentions explicitly as excluded:

Crypto assets that fall under the scope of financial instruments
Those that qualify as deposits or structured deposits
Assets that qualify as funds
Those that qualify as securitization positions
Crypto-assets that qualify as non-life or life insurance policies
Pension product and social security schemes
Non-fractionalized non-fungible tokens
Transactions between certain public entities and groups
Central Bank Digital Assets
Non-transferrable digital assets
Financial instruments that fall under other directives

What Is the Markets in Crypto-Assets Act?

The Markets in Crypto-Assets Regulation is a European Union framework that defines crypto-assets, how they are regulated, who can regulate them, requirements for any non-fungible token, and providing crypto products and services.

Are Crypto Asset Markets Regulated?

In many jurisdictions, the crypto markets are regulated, but this doesn't mean your money is safe. It is ultimately up to you to ensure your cryptocurrency is safe and secure.

What Regulatory Protections Currently Apply to Crypto Assets?

Most countries have mandated that all crypto service providers comply with anti-money laundering and countering the finance of terrorism regulations. Many have implemented some protection by regulating exchanges that operate in their jurisdictions. Some exchanges maintain crime insurance to protect themselves and, in some cases, their customers, but generally speaking, there are no protections that apply to crypto assets.

The Bottom Line

MiCA is a milestone in the cryptocurrency market since it is the first comprehensive regulation for the still-emerging technology. The framework defines the assets that fall under its jurisdiction, who can offer related products and services, and who has the authority to regulate and enforce the legislation. MiCA will be fully applicable by the end of December 2024.

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