The Markets in Crypto-Assets Regulation — MiCA — the world’s first and most far-reaching framework for crypto, came into full effect across all 27 EU Member States on 1 July.
New EU Crypto Regime
Crypto exchanges, wallet providers, and brokers operating in Europe must now hold a Crypto-Asset Service Provider, or CASP, licence. The process is, however, streamlined: a licence granted in one Member State carries “passporting” rights, making it valid throughout the entire European Union. NFTs, DeFi, and CBDCs sit outside the scope of the law, as they are classed respectively as digital art or collectibles, decentralised systems, and central bank-issued assets.
Comprehensive Effect
Requirements for firms have been tightened considerably. Prior to issuing any new token, crypto projects must publish a “whitepaper” setting out the project’s risks, technology, and environmental impact in clear terms; providing misleading information will result in substantial fines. Market abuses such as “pump and dump” schemes or trading on insider information — long criminal offences in securities markets — are now criminalised for crypto as well. Issuers of stablecoins must hold a 1:1 cash reserve, and the trading of non-EU stablecoins within Europe will be prohibited.
The Point is ...
While MiCA’s stated aim is to protect retail investors from fraud, money laundering, and abrupt firm collapses of the sort seen with FTX, which have been common in the EU crypto market, these rules will no doubt also be used to advance policymakers’ objectives. Investors should therefore approach the new landscape with that in mind.
