The Markets in Crypto-Assets Regulation (MiCA) represents a major step forward in regulating the crypto-asset market within the European Union (EU). Implemented in June 2023, MiCA aims to provide a unified and robust regulatory framework for crypto assets that are not currently covered by existing financial services legislation. As a crypto business, it is crucial to comprehend MiCA's key provisions and prepare for the forthcoming regulatory changes. Additionally, the transitional phase poses unique challenges, and understanding the supervisory convergence approach can help you navigate the evolving landscape.
MiCA Overview
MiCA introduces uniform market rules for crypto-assets in the EU, covering assets like asset-reference tokens and e-money tokens. Key provisions revolve around transparency, disclosure, authorization, and supervision of crypto-asset transactions. The regulation's primary goals are to safeguard market integrity, ensure financial stability, and enhance consumer awareness of associated risks.
MiCA Implementation and Consultation Process
MiCA's implementation will occur in several stages through Level 2 and Level 3 measures. ESMA, in cooperation with EBA, EIOPA, and the ECB, is actively engaging with the public to develop technical standards. These standards will be released in three consultation packages, allowing stakeholders to provide valuable feedback before finalization.
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Consultation Package 1
Expected to launch in July 2023, Package 1 will cover crucial mandates, such as the content and forms for notification from entities to NCAs, authorizations for CASPs, complaint handling procedures, and management of conflicts of interest. Stay vigilant for the specific duration of the consultation for each standard.
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Consultation Package 2
Anticipated for release by October 2023, Package 2 will address remaining mandates with a 12-month deadline. Topics include sustainability indicators, business continuity requirements, trade transparency data, crypto-asset white papers, and public disclosure of inside information.
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Consultation Package 3
The final package, expected in Q1 2024, will encompass mandates with an 18-month deadline. Critical subjects to be covered include the qualification of crypto assets as financial instruments, market abuse detection, investor protection, and system resilience.
MiCA Transitional Phase and Supervisory Convergence
During the transitional phase, Member States can implement specific "transitional measures" allowing existing crypto-asset service providers to continue their operations until July 1, 2026, or until granted or refused a MiCA authorization. ESMA is actively promoting supervisory convergence to harmonize practices across EEA (European Economic Area) jurisdictions during this period.
SMA Workplan
ESMA's efforts in the transitional phase involve facilitating a platform for NCA supervisors to share insights and best practices, mapping the current landscape of crypto-asset services, and engaging in consultations with the Commission to address any ambiguous MiCA provisions.
As the MiCA regulations are being developed and refined, staying informed and actively participating in the consultation process is essential for crypto businesses. To successfully navigate the changing landscape, consider the following steps:
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Stay Informed: Regularly monitor updates from ESMA and other regulatory bodies to understand the evolving requirements and timelines.
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Participate in Consultations: Engage in the consultation process by providing feedback on technical standards. Your input can help shape the final regulations.
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Prepare for Authorization: Be prepared to apply for authorization under MiCA regulations when the time comes, ensuring compliance with all relevant provisions.
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Review Compliance Practices: Evaluate your current compliance practices and make necessary adjustments to align with MiCA's requirements.
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Seek Professional Advice: Consider consulting legal and financial experts with expertise in crypto regulations to guide you through the transitional phase and beyond.
MiCA represents a landmark regulation that will bring much-needed clarity and stability to the crypto-asset market in the EU. By actively participating in the consultation process and preparing for the upcoming changes, crypto businesses can position themselves for success in this rapidly evolving regulatory landscape.
How can BDO help?
BDO Malta is well positioned to assist your firm in navigating the hurdles of MiCA thanks to our extensive knowledge and complete understanding of both the virtual financial asset regulatory landscape and the unique characteristics of the crypto-asset market. We are one of the few organisations in Malta to be recognised as Systems Auditors for Crypto-Asset Regulated entities.
Our technical compliance services are designed to provide your company with complete assurance of achieving MiCA's demanding criteria. As the regulatory landscape evolves, following technical standards and best practices becomes increasingly important for remaining compliant and competitive.
Have questions? Contact us