3. Key Measures included within MiCAR
3. Key Measures included within MiCAR
MiCAR will protect investors by increasing transparency and putting in place a comprehensive framework for crypto-asset issuers and service providers including compliance with the anti-money laundering rules[1]. The new rules cover issuers of certain utility tokens. It also covers service providers such as trading venues and crypto-asset custody providers.
It also introduces a harmonized regulatory framework in the European Union. MiCAR aims to protect investors and ensure financial stability while allowing innovation and fostering the attractiveness of the crypto-asset sector[2].
Issuers of Asset Reference Tokens (ARTs) and E-Money Tokens (EMTs)
MiCAR will bring issuers of certain types of crypto-assets into the regulatory framework. Specifically, MiCAR will establish new rules for those types of crypto-assets known as "stablecoins" including Asset-Referenced Tokens (ARTs), E-Money Tokens (EMTs) and certain utility tokens. MiCAR distinguishes stablecoins by defining ARTs as being linked to multiple currencies, commodities or crypto-assets and EMTs as being linked to a single fiat currency. Utility tokens covered by MiCAR will be those intended to provide access to a good or service that will be supplied by the issuer of that token.
Issuers of ARTs and EMTs will be required to be authorised by the Central Bank of Ireland (the Central Bank) and to publish a white paper that will contain information for investors; they will also be required to build up a sufficiently liquid reserve with a 1/1 ratio and meet other regulatory requirements. MiCAR recognises that some ARTs or EMTs may be significant due to their size and other factors and as a result may present a number of risks with respect to financial stability, the smooth transmission of monetary policy and sovereignty, or the smooth operations of payments systems. The European Banking Authority (EBA) will have supervisory responsibilities for issuers of significant ARTs and EMTs.
Crypto-Asset Service Providers (CASPs)
CASPs shall require authorisation in order to operate within the EU. Crypto-asset services include the operation of a trading platform, custody and administration of crypto-assets on behalf of third parties, the exchange of crypto-assets for funds/other crypto-assets, the execution of orders for crypto-assets, the placing of crypto-assets, providing transfer services for crypto -assets to third parties, providing advice on crypto-assets and portfolio management of crypto-assets. At a high level, CASPs that provide crypto-asset services to third parties (e.g. consumers) on a professional basis will be subject to new rules including governance and liquidity requirements.
Market Abuse
MiCAR also introduces new rules that prohibit market abuse related to any type of crypto-asset that is traded, including unlawful disclosure of inside information, insider trading and actions that are likely to lead to disruption or manipulation of crypto-assets, e.g. prices, volumes and transactions.
Level 2 and Level 3 Text
The European Supervisory Authorities[3] (ESAs) are continuing to develop level 2 and 3 texts which, when finalised, will provide greater granularity on certain provisions in MiCAR[4],[5]. These texts are important to industry and National Competent Authorities (NCAs)[6] alike, as they will provide detailed specifications of key obligations for firms, including applicant firms seeking authorisation such as CASPs or issuers of asset-referenced tokens, and details regarding the supervisory responsibilities of NCAs for example.
On 12 July 2023, both the ESMA and the EBA launched their first packages of draft Regulatory Technical Standards and draft Implementing Technical Standards, providing an opportunity for industry to consult and engage with ESAs. The ESMA Consultation Paper[7] is open for input until 20 September 2023 and the EBA Consultation Papers[8] remain open until 12 October 2023.
[1] https://www.consilium.europa.eu/en/press/press-releases/2023/05/16/digital-finance-council-adopts-new-rules-on-markets-in-crypto-assets-mica/#:~:text=MiCA%20will%20protect%20investors%20by,so%2Dcalled%20'stablecoins'.
[3] The ESAs are the: European Banking Authority, European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority. The ESAs work primarily on harmonising financial supervision in the EU by developing the single rulebook, a set of prudential standards for individual financial institutions. The ESAs help to ensure the consistent application of the rulebook to create a level playing field. They are also mandated to assess risks and vulnerabilities in the financial sector.
[4] Level 2 text refers to the technical implementing measures through which framework legislation is implemented. This phase of the EU legislative process is led by the ESAs working in conjunction with the Commission.
[5] Level 3 text refers to guidelines on the implementation of the rules. This stage is led by committees of national supervisors responsible for advising the Commission in the adoption of level 1 and level 2 acts
[6] The Central Bank of Ireland will be the designated National Competent Authority (NCA) for the authorisation and supervision of entities that will be subject to MiCAR.