What is the EU’s Markets in Crypto Assets (MiCA) law?

The European Union is exploring how to integrate Web3 with traditional documentation and transactional payments. The solution, according to Belgium’s digital minister Mathieu Michel lies in the Markets in Crypto Assets (MiCA) law and a custom-made blockchain network.

This blockchain, referred to as “Europeum”, forms part of the EU’s Markets in Crypto Assets (MiCA) legislation. The legislation is currently waiting to be voted on. Should it be approved, the European Union will have an EU-wide regulation in place to establish standardised rules for crypto-assets. The regulation would also include the possibility of developing and launching an EU-wide blockchain.

According to Michel, this blockchain would serve to function as a tool to conduct digital transactions in the EU. He noted that it would be competition to Bitcoin and Ethereum in its function; to operate as both a payments and to conduct smart contracts. Should it launch successfully, the network would also be used to store documents at both a personal and a national level. This would help with improving storage with digital and tokenised versions of property ownership, driving licenses and professional qualifications.

If the legislation is sanctioned, the blockchain would be constructed within the boundaries of the regulations and would be “constructed around the foundational values that underpin European society”.

What is the EU’s Markets in Crypto Assets (MiCA) law?

The proposed Markets in Crypto Assets (MiCA) law will be voted in by the EU in April. The legislation was initially introduced by the European Council in September 2020. The function behind the broader regulatory proposition is designed to encourage innovation while improving consumer and investor protection as the emerging digital asset market continues to grow.

If it is accepted, MiCA will serve to create a standardised and common licensing regulation for cryptocurrency companies. Firms and businesses in the crypto industry, such as wallet providers and exchanges, would be required to operate under the MiCA regulations in all 27 countries in the EU bloc.

As it stands currently, European regulators have accepted the law in principle. The legislation still needs to  be formally signed off and approved by EU’s Governing Council, made up by the national governments. Only then will it be set into law. The fundamentals of the proposed MiCA regulation include the following:

Mandatory registration

All crypto-asset service providers (CASPs), as well as crypto issuers such as exchanges and wallet providers, will be required to register with the relevant national authority in their jurisdiction.

Authorisation requirements

Crypto-asset service providers will need to obtain authorisation from their national authority before offering services to customers.

Consumer protection

MiCA aims to protect consumers by ensuring that service providers have adequate financial resources, are transparent about their fees and charges, and meet certain capital and liquidity requirements.

A standardised approach

The law aims to create a harmonised approach to the oversight and monitoring of cryptocurrency assets across the European Union. This means all national authorities and governments will operate from the same legislation to maintain consistency.

Anti-money laundering (AML) and counter-terrorism financing (CTF)

Service providers will need to comply with AML and CTF regulations. This includes customer due diligence requirements and reporting suspicious transactions to the relevant authorities.

Overall, MiCA is seen as a significant step towards regulating the cryptocurrency industry in the EU and providing greater legal certainty for investors and businesses. While the regulation is still in the proposal stage, it remains to be seen how it will be implemented and enforced in practice.