Original author: 0x Azao
Original source: The Tao of DeFi
On September 25, 2020, the European Commission (European Commission) released a draft called "The Markets in Crypto-assets Regulation (MiCA)", aiming to create a comprehensive and unified regulation for the European Union. Cryptoasset regulatory framework. The bill is part of the EU's Digital Finance Strategy package at the macro level. It is also the first legislative initiative to establish a comprehensive regulatory framework for crypto-assets at the EU level, covering the definition, classification, issuance and trading standards of crypto-assets. issues such as entry, crypto asset market service providers, prevention of crypto asset market abuse, and protection of investor rights and interests.
After nearly two years of legislative procedures, on October 10, 2022, the European Parliament Committee on Economic and Monetary Affairs (European Parliament Committee on Economic and Monetary Affairs) initially passed MiCA, which laid the foundation for the subsequent adoption of the bill in the plenary session of the European Parliament (European Parliament plenary session) paved the way. MiCA is expected to enter into force in early 2024.
MiCA is a landmark legislation that aims to create a unified regulatory framework for crypto-asset markets in the EU and fill gaps in the current EU financial regulatory framework. Once passed, MiCA heralds the arrival of an era of unified supervision of the crypto-asset market, which will replace all regulatory provisions on crypto-assets within each EU member state (MiCA is a "Regulation" at the level of EU legislation, and the regulations regulate EU member states have direct legal effect). This will also provide regulatory frameworks and ideas for legislators in different jurisdictions around the world, accelerating the transition of the global crypto asset market from the "barbaric growth" stage to the "legal era."
1. Scope of application of MiCA
Once formally approved, MiCA will develop unified definitions (at EU level) of key terms for all activities related to crypto-asset markets in order to standardize regulation. In general, MiCA mainly supervises: (i) various types of crypto-assets; (2) various types of crypto-asset services (crypto-asset services) and service providers (service-providers).
MiCA provides a broad definition for crypto-assets, that is, a digital form of value or rights that can be transmitted and stored electronically using DLT or similar technologies (Crypto-assets are defined in MiCA as a digital representation of a value or a right that may be transferred and stored electronically using DLT or similar technology). Based on whether crypto-assets need to be anchored to the value of other assets, MiCA classifies crypto-assets into electronic-money tokens (EMTs), asset-reference tokens (Asset-Reference Tokens, ARTs) and other crypto-assets.
1. Electronic currency tokens EMTs, which are encrypted assets that anchor their value by referring to a single legal currency, are a type of "stable currency". Like traditional electronic money, EMTs are electronic alternatives to physical money, mostly used for payment purposes.
2. Asset reference tokens ARTs, that is, crypto assets that anchor their own value by referring to other value assets, equity, or a combination of the two (including one or more legal currencies). ARTs include all " Stablecoins", such as USDT, USDC, BUSD, etc.
3. Other crypto-assets, that is, all other crypto-assets except ARTs and EMTs.
（from EU Markets in Crypto-Assets (MiCA) Regulation Expected to Enter into Force in Early 2023, Mayer Brown）
MiCA will fill the gap in the current EU financial regulatory framework and establish a regulatory framework for crypto assets, which is applicable to all entities involved in the issuance of crypto assets (the Issuance of Crypto-assets) and providing crypto asset-related services in the EU. MiCA stipulates the following unified rules:
Transparency and disclosure requirements for crypto-asset issuance and trading access;
Authorization and regulation of cryptoasset service providers and issuers;
Operational, organizational and governance rules for asset-referenced tokens, electronic-money tokens and other crypto-asset service providers;
Cryptoasset Consumer Protection Rules;
Measures to prevent market abuse and ensure market integrity for crypto assets.
Similar to the two regulatory levels at the federal and state levels in the United States, MiCA's regulatory agencies at the EU level are the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA), while the European Central Bank (European Central Bank) will serve as one of the regulators of stablecoins. At the national level, the regulatory agencies designated by each member country will manage and implement MiCA.
MiCA does not apply to NFTs because their value cannot be measured by the same market means or the same asset. Unless MiCA believes that the characteristics or uses of the NFT should be recognized as a crypto asset based on a substance-over-form approach. The European Commission will be mandated to submit a report 18 months after MiCA comes into force to assess the potential for regulating NFTs.
MiCA does not apply to DeFi, as long as the DeFi service is fully decentralized (a fully decentralized manner) and does not involve any third party. MiCA did not further elaborate on the definition of "complete decentralization", which is still a bit vague for DeFi projects. In addition, according to Circle EU Strategy and Policy Director Patrick Hansen, the European Commission has launched a public tender for the "Embedded Supervision of DeFi on Ethereum" study, which aims to study how to cooperate with supervision by automatically reading public chain data. The ability to control DeFi.
2. MiCA’s issuance of crypto assets
MiCA will regulate the issuance of crypto assets to the EU public, requiring crypto asset issuers to register as a legal entity in an EU member state (incorporated as a legal entity in the EU) and publish their white paper before the issuance, describing in detail the proposed issuance. Cryptoassets and communications with regulators. MiCA will also formulate a marketing compliance system applicable to the issuance and trading of crypto assets, as well as a code of conduct for crypto asset issuers such as honesty, fairness, professionalism, and responsibility to regulate the activities that enter the transaction process after the issuance of crypto assets. In addition, crypto asset issuers also need to consider the relevant laws and regulations applicable to the member states where they are located, such as the requirements of the EU Anti-Money Laundering Directive.
For stablecoins, ARTs are subject to more stringent regulatory requirements than EMTs, as ARTs are considered more likely to pose a potential threat to the monetary stability of the EU. Before being publicly offered or traded on an exchange, the issuer needs to register in an EU member state and apply for prior approval from the local regulatory agency. The issuance application must include: (i) Issuer details, including organizational structure, Business model, governance model, internal control measures and risk control methods, own capital requirements, conflicts of interest, holding asset reserves, asset custody, etc.; (ii) Legal opinions on ARTs; (iii) Issuer organizational documents; (ii) Legal opinions on ARTs; (iii) Issuer organizational documents; iv) ART White Paper. After receiving the issuance application, the local regulatory agency will seek opinions from the EU cryptoasset market regulators ESMA, EBA, and the EU monetary regulator ECB. After obtaining issuance approval, ARTs issuers also need to regularly perform reporting obligations to regulatory agencies regarding trading customers, transaction amounts, reserves, etc. At the same time, MiCA also requires issuers of ARTs to establish sufficient liquidity reserves in the form of certain ratios or deposits to protect consumers. The reserves need to match the full value of their claims to prevent the liquidity risk of a "bank run".
MiCA has also divided into significant asset-referenced tokens and significant e-money tokens. Since they may have a more profound impact on financial markets and sovereign currencies, they will directly Accept the stricter supervision of the EBA.
Some people believe that MiCA’s supervision of stablecoins is too strict. Once MiCA takes effect, all stablecoins on the existing market must obtain approval from regulatory agencies before they can be traded in the EU, further improving the compliance of stablecoin issuers and service providers. cost. In addition, the number of daily transactions and trading volume of key ARTs and key EMTs will be limited. According to Dune data on December 5, 2022: "Currently USDT accounts for 30.9% of the stablecoin market, USDC accounts for approximately 29.7%, and BUSD accounts for approximately 21.1%." Considering that the three major stablecoins currently account for a combined share of the trading market With a volume of more than 80%, once MiCA imposes restrictions on mainstream US dollar-anchored stablecoins in order to maintain the sovereign currency, it may hinder the competitiveness and innovation potential of the EU crypto-asset market.
3. MiCA for crypto asset service providers
MiCA may have the broadest impact on crypto asset servicers and market participants. MiCA requires that crypto asset services can only be provided by legal persons and obtain the qualification (license) of a crypto asset service provider according to MiCA. In addition, they also need to comply with a series of codes of conduct, such as reporting systems and business restrictions. system etc. Any entity that wants to engage in crypto asset services in the EU needs to obtain service provider qualifications. The advantage is that once a crypto asset service provider is approved, it will be able to cover 27 EU countries and a population of 450 million, just like the EU's "Schengen" passport visa. Similarly, MiCA also imposes further strict regulatory requirements on significant crypto-asset service providers.
Crypto-asset services (crypto-asset services) include: asset custody services, crypto-asset trading platform operations, currency-to-currency exchange services, brokerage services, investment advisory services, crypto-asset management and other services. In order to avoid conflicts with the current EU financial regulatory framework, MiCA will not apply to European financial institutions that are already under supervision, such as credit institutions, investment companies, market makers, electronic money institutions, asset management companies, etc.
4. The impact and significance of MiCA
Prior to MiCA, crypto-assets were defined as qualified financial instruments (QFI’s) in the EU, and EU law did not prohibit financial companies from holding, trading and providing crypto-asset-related services. Entities engaged in QFI’s transactions are regulated at the member state level and can only simply rely on the existing QFi license to provide crypto-asset-related products and services in a single member country, which greatly limits the large-scale development of crypto companies. At the same time, crypto businesses must also comply with numerous vaguely defined EU financial rules and regulations within a single member state, including AML/CTF, CRD/CRR, EMD2, MiFID II, PSD2, compensation, margin, deposit and sanctions obligations, etc.
After MiCA, it focuses on four main purposes: establishing an exclusive legal framework for crypto assets and ensuring regulatory transparency; supporting innovation and fair competition; protecting the interests of small and medium investors and the stability of the crypto market; and maintaining financial stability. We can see that the unified crypto-asset regulatory framework within the EU will be based on MiCA, directly forming a large crypto-asset market that radiates to 27 countries and a EU population of 450 million.
As Binance Europe executive Martin Bruncko said:
Europe’s previous regulation of crypto assets was decentralized, with 27 member states having their own relevant regulations, which made it difficult for crypto companies operating in the EU to meet full compliance in many jurisdictions. And the emergence of MiCA is good news because it is creating a single market. MiCA’s positive significance to the development of the crypto industry far outweighs its negative significance. A regulated large market is more conducive to the development of crypto assets, and smaller cryptocurrency exchanges and start-ups may benefit more from MiCA.
There is no doubt that the impact of MiCA has been huge. It can be seen from MiCA that the EU focuses more on a "comprehensive" top-level regulatory framework in its regulatory model. From a business perspective, MiCA has made clear basic provisions for crypto-assets and crypto-asset service entities, and first solved the main contradictions of crypto-assets (especially stable coins). On this basis, we will gradually expand to NFT, DeFi, smart contracts, DAO and other fields, and strengthen the supervision of crypto assets step by step in a step-by-step manner.
From a legislative perspective, MiCA is just the beginning. The EU’s Digital Finance Strategy package (also includes legislation to adjust the organization of EU financial institutions to adapt to the digital age, the Fund Transfer Regulation (TFR) on anti-money laundering) , cybersecurity legislation for crypto entities (Digital Operations Resilience Act (DORA), pilot DLT projects, regulatory sandboxes that will allow market participants to experiment with the use of cryptocurrencies in a regulated environment, etc.) will be gradually rolled out, aiming to ensure that the EU In line with the development model of the digital era, we further leverage and support the potential of digital finance in innovation and competition.
This series of measures will make the EU's regulatory framework for the crypto asset market clearer and more certain. On the one hand, it will not impose too many restrictions on innovative activities and cause a loss of market vitality, while maintaining the competitiveness and innovation of the EU crypto market. On the one hand, it can also summarize regulatory experience on the basis of MiCA, regulate the market more rationally, protect the rights and interests of investors, and maintain the stability of the financial market.
(The above content is excerpted and reprinted with the authorization of partner MarsBit, original text link | Source: The Way of DeFi)
Statement: The article only represents the author's personal views and opinions, and does not represent the objective views and positions of the blockchain. All contents and opinions are for reference only and do not constitute investment advice. Investors should make their own decisions and transactions, and the author and Blockchain Client will not be held responsible for any direct or indirect losses caused by investors' transactions.
This article: After the cryptocurrency regulation "MiCA" takes effect, can the EU fully embrace Web3? First appeared in Block Guest.
