A package of measures relating to digital finance in Europe ("digital finance package") had been published by the European Commission on September 24, 2020. It included several proposed texts, including the one behind the MICA Regulation of May 31, 2023. Together with the Regulation of May 30, 2022 concerning DLT market infrastructures, known as the "Pilot Regime", it forms part of the legislation applicable to the market (issuers and service providers) for crypto-assets that do not constitute financial instruments, which are covered by MiFID 2.
Categories of crypto-assets
Crypto-assets are characterized by cryptography and distributed ledger technology, commonly referred to as "blockchain". The MICA regulation distinguishes between 3 categories: utility tokens, asset-referenced tokens and e-money tokens. Utility tokens are designed to provide access to a good or service. The other two categories have a financial purpose, include special categories - tokens referring to an asset or assets of significant importance and tokens of electronic money of significant importance - and are reminiscent of "stablecoins", since, like them, they refer to certain assets.
This tripartite classification should not be misleading. The categories identified are not the only crypto-assets covered by the MICA regulation, which also applies to virtual currencies (e.g. Bitcoin). It should be noted that digital currencies created by central banks are of a different nature and fall outside the scope of the regulation.
Other exclusions need to be qualified. Certain crypto-assets that are unique and non-fungible with other crypto-assets are excluded. This applies to certain "NFTs" (non-fungible tokens) whose characteristics are not those of utility tokens, for example. This excludes, for example, NFTs representing a digital collector's image.
Regimes for offers and admissions involving crypto-assets
The MICA Regulation distinguishes between offers and admissions for asset-referenced tokens, e-money tokens and crypto-assets other than these two categories.
They share a common legal element. Both the offer and admission are subject to the drawing up of a white paper. This is an information document not unlike the prospectus to be drawn up in the event of a public offering of securities or the admission of such securities to trading on a regulated market. It must contain a full range of information, including a summary.
A white paper is an essential requirement for transactions involving crypto-assets other than asset-referenced tokens and e-money tokens. The white paper is not subject to prior approval by the competent authorities.
Such an approval is required as far as transactions involving asset-referenced tokens are concerned. It should be noted that this rule does not apply to all issuers. In particular, credit institutions are exempt. Noting that they are also excluded from certain provisions normally applicable to issuers of tokens linked to one or more assets, such as capital requirements. On the other hand, like all issuers of such crypto-assets, they are subject to rules of conduct and the obligation to build up and maintain reserve assets.
The regime applicable to the offering and admission of electronic money tokens is characterized by the partial application of the Electronic Money Directive of September 16, 2009. It is also characterized by the fact that the white paper to be drawn up when tokens are traded does not have to be approved by the competent authorities.
Note that tokens referring to asset(s) of significant importance and electronic money tokens of significant importance follow a particular regime which is characterized by the supervision of the European Banking Authority (EBA).
Crypto-asset service providers
Crypto-asset service providers (CASPs) are regulated entities, and therefore professionals who can only provide a service on crypto-assets if they have obtained approval from a competent national authority. The MICA Regulation mentions 10 services, such as the exchange of crypto-assets for funds and the provision of advice on crypto-assets. All crypto-assets are covered by the regulation, including virtual currencies.
The MICA Regulation imposes two categories of obligations on professionals: general obligations and specific obligations, and therefore obligations that depend on the service provided. These obligations are not unlike those imposed by MiFID2. These include the obligation to act honestly, fairly and professionally, in the best interests of customers, and to provide information that is fair, clear and not misleading.
Once approved by their reference competent authority, PSCAs will then be able to provide their services within the European Union, thus benefiting from an intra-European passport mechanism.
The repression of market abuse
The MICA Regulation organizes both the prevention and repression of market abuse. It applies to crypto-assets admitted to trading on a trading platform or for which an application for admission has been made, as well as to transactions involving these assets, even if they are not carried out on a trading platform. Like the regulations governing market abuse of financial instruments, it is based on the prohibition of insider dealing and market manipulation. The provisions of the MICA Regulation are quite similar to those of the Market Abuse Regulation of April 16, 2014.
National authorities have an essential role, as they are responsible for supervising the crypto-asset market. In particular, this takes the form of monitoring crypto-asset service providers. The role of the national authorities is not, however, exclusive of the role of the European supervisory authorities. On the one hand, the European Securities and Markets Authority is required to maintain a register of certain white papers, issuers and crypto-asset service providers. On the other hand, the European Banking Authority is vested with the power to supervise issuers of tokens referring to an asset or assets of significant importance and electronic money tokens of significant importance. This is a significant power, as it is the first time that this authority has been vested with supervisory powers over certain players in the financial sector.
Finally, national authorities will need to work with the European supervisory authorities (the European Banking Authority and the European Securities and Markets Authority) in view of the issues at stake in the forthcoming European work, and also with regard to the transition periods from which certain players, subject to national regimes, may benefit.