The European Union (EU)’s landmark regulation for the increasingly high profile crypto-assets sector comes into full force today (30 December).
The 27-member bloc’s Markets in Crypto-Assets (MiCA) regulation (also abbreviated to MiCAR) was approved by European parliamentarians in April last year, making the EU the world’s first major jurisdiction to establish a comprehensive regulatory framework for crypto-assets.
Part of a series of measures relating to digital finance in Europe, MiCA regulates crypto-asset issuance and services not covered by pre-existing regulations on financial instruments and financial products by creating a harmonised European regulatory framework. It specifically introduces a pan-European licensing and supervisory regime for issuers of crypto-assets, crypto platforms and crypto-asset service providers (‘CASPs’) across a broad range of crypto-assets, including exchange tokens (such as Bitcoin), utility tokens, asset-referenced tokens (‘ARTs’) and electronic-money tokens (‘EMTs’).
The regulation (available across 166 pages in EN) entered into force on 29 June 2023 and applies from today, with the exception of provisions on ARTs and EMTs, which came into force on 30 June 2024.
The MiCA milestone comes as the world waits to see how a Donald Trump-led administration will tackle crypto regulation in the US. The president-elect, who is due to begin his second term as president on 20 January 2025, has pledged to make the US the ‘crypto capital’ and ‘Bitcoin superpower’ of the world.
EU: global ‘standard-setter’
The centre-right European People’s Party (EPP) Group, which is the European Parliament’s largest political group, described MiCA’s approval last year as making Europe the ‘standard-setter in the global crypto market’, adding that it would ‘put order in the Wild West of crypto-assets’.
The institution’s MiCA rapporteur Stefan Berger MEP hailed his fellow lawmakers’ green light as putting the EU “at the forefront of the token economy.”
“Consumers will be protected against deception and fraud, and the sector that was damaged by the FTX collapse can regain trust,” Berger said – a reference to the Bahamas-headquartered cryptocurrency exchange whose implosion over just a few days in November 2022 made mainstream news around the world.
“Consumers will have all the information they need and all underlying risks around crypto-assets will have to be monitored,” the German MEP continued, saying that the regulation “brings a competitive advantage for the EU” and that the “European crypto-asset industry has regulatory clarity that does not exist in countries like the US.”
Earlier this month (6 December) Trump announced the appointment of David Sacks as White House artificial intelligence (AI) and crypto ‘czar’ – a role in which the former PayPal senior executive would ‘guide policy … in two areas critical to the future of American competitiveness.’
The president-elect has also announced (on 22 December) that Bo Hines would be executive director of the Presidential Council of Advisers for Digital Assets (the ‘Crypto Council’) – a new advisory group ‘composed of luminaries from the crypto industry’ that will be chaired by Sacks. Writing on his social media platform Truth Social, Trump said that Hines – a former college football player who was narrowly defeated as a Republican nominee in North Carolina’s 13th congressional district in 2022 (when he was endorsed by Trump) – would work with Sacks ‘to foster innovation and growth in the digital assets space, while ensuring industry leaders have the resources they need to succeed.’
MiCA and DORA’s progress
The European Commission’s Directorate-General for Financial Stability, Financial Services and Capital Markets Union (DG Fisma) on 19 December published an overview of progress towards implementation of both MiCA and the EU’s Digital Operational Resilience Act (DORA).
MiCA will support innovation by ‘providing for the proportionate regulatory and supervisory treatment of issuers of crypto‑assets and crypto-asset service providers, enabling them to scale up their business within the single market,’ the Commission noted, adding that ‘at the same time, MiCA aims to address the risks to investor/consumer protection, market integrity and financial stability that crypto‑assets can pose.’
The regulation overall contains about 35 different mandates for delegated acts, regulatory technical standards and implementing technical standards.
The European Securities and Markets Authority (ESMA) and European Banking Authority (EBA) have produced these drafts during 2024. The Commission has since been able to adopt many of them. Some have, following scrutiny by the European Parliament and Council, been published in the Official Journal of the EU. Others have been adopted but remain subject to scrutiny (review). Some are yet to be adopted.
DORA entered into force in January 2023 and will apply from 17 January 2025.
‘Significant step’: ESMA’s Ross
DG Fisma’s update came a couple of days after ESMA published its last package of final reports containing regulatory technical standards and guidelines ahead of MiCA’s full entry into application.
In a 17 December press release accompanying the policy documents’ release, ESMA chair Verena Ross described the entry into force of the MiCA regime as “a significant step towards having a regulatory framework for the crypto market in place.”
But she warned that it was “crucial to recognise that the new regime would not suffice to eliminate the inherent uncertainty and volatility in the crypto-assets market, and investors should fully understand the risks before engaging in this space.”
“Looking ahead, as the transitional period progresses, we will continue to provide guidance and work with all NCAs [national competent authorities] to ensure the smooth implementation of MiCA and to support a level playing-field through supervisory convergence actions,” she added.
As MiCA is a regulation, national implementing legislation is not required among EU member states. However, states need to ensure national legislation aligns with MiCA. On 18 December 2024, the national parliament of the EU’s most populous state, Germany, passed an Act on the Digitalisation of Financial Markets (‘Finanzmarktdigitalisierungsgesetz’) that will facilitate MiCA’s implementation.
