The Markets in Crypto Assets Regulation Bill (MiCA) has started to take its final steps towards legalization. We are coming to an end in the MiCA process, which started in September 2020. The European Union (EU) Council approved this bill, which will create a first for stablecoins (stable cryptocurrencies), and was signed by EU lawmakers on 10 October. MiCA, which was approved with 28 approvals and 1 dissenting vote, will now be officially approved after a final vote in the EU Parliament. It is expected to become law in a year or a half after it passes parliament.
Subject and Scope of MiCA
The aim of the EU in designing MiCA is to encourage technological developments. In addition, it aims to support market integrity and financial stability by regulating financial stability, transparency, control, energy use and consumer protection, and the public offering of crypto assets.
ALSO, MiCA includes measures to prevent market manipulation, money laundering, terrorist financing and other criminal activities. MiCA will apply to natural and legal persons and other enterprises engaged in the issuance, public offering and trading of crypto assets or providing services related to crypto assets within the EU.
MiCA, according to its first article, on a trading platform for crypto assets;
issuance of crypto assets,
transparency and disclosure requirements for public offering and trading;
crypto asset service providers,
authorization and supervision of asset-referenced token issuers and electronic money token issuers;
operation, organization and governance of asset reference token issuers, electronic money token issuers and crypto asset service providers;
protection of crypto-asset holders in issuance, public offering and trading;
protecting clients of crypto-asset service providers;
insider trading in crypto assets in order to ensure the integrity of crypto assets,
measures to prevent illegal disclosure of inside information and market manipulation,
lays down uniform requirements for placing on the market and placing on the market[1].
Obligations of MiCA
First of all, organizations that provide crypto-asset services are called Crypto-Asset Service Providers (CASPs), that is, crypto-asset service providers (KVHS). Subsequently, MiCA introduces regulatory, consumer protection and environmental safeguards for cryptoassets, including cryptocurrencies, and specifically imposes obligations on crypto-asset service providers.
Accordingly, in order to offer crypto-asset services, companies will need to obtain an EU-wide pre-authorization from the authorized member state governments.
Credit institutions and companies whose services have been authorized as financial services by the Financial Instruments Markets Directive (MiFID) are exempt from this requirement.
In the MiCA application, crypto-asset service providers will be licensed to provide crypto-asset services. In cases where an EU country has established a special licensing regime for its VATs, it is noteworthy and important that regulators implement a simplified authorization process to assist companies in transitioning from a national license to a MiCA CASP (CPL) license valid throughout the EU.
In the issuance of cryptoassets, having the authority to issue cryptoassets is a prerequisite according to MiCA. However, all issuers of crypto-assets will first be required to publish a whitepaper containing the characteristics, rights and obligations of these assets, as well as basic technology and project background information.
Compliance with certain precautionary rules in the marketing of crypto assets and obligations to behave honestly, fairly and professionally towards crypto asset holders are another essential regulation for market making activities.
Does MiCA Cover NFTs?
It seems that NFTs are excluded from MiCA. The necessity of a separate law for NFT is being discussed and since they are not regulated by MiCA, it is possible that the EU will take action on this in the near future. According to some views, it may be possible to classify NFTs as securities under the new bill. If an NFT falls within the scope of existing crypto asset categories, it can also be considered to fall within the scope of MiCA. According to the EU statement, it is expected that a proportional and horizontal legislation proposal will be made to establish a regime for NFTs and to address the risks posed by this new market.
What will be the consequences of regulation and why is it important?
A remarkable point is that MiCA’s approval by the EU Parliament means that it will enter into force in all EU countries. Enforcement in every country in the EU without the need for implementing laws would greatly support consumer protection and effective and compliant access to innovative crypto-asset markets across the single market. The harmonization of regulations on crypto assets has been expected for a long time and it would not be wrong to say that it will now be possible.
In the US, it was announced in March that Senator Kristen Gillibrand was working with another Senator Cynthia Lummis to draft a bipartisan bill that would create a regulatory framework for digital assets and crypto.[2] . We expect these works to accelerate in a short time. It is known that the Securities and Exchange Commission (SEC) and the Commodity and Futures Trading Commission (CFTC) continue to work in this area in the USA. Therefore, the legal rules that are expected to be applied to crypto assets and crypto asset service providers in the world are being created right now. We anticipate that all these developments will shed light on and accelerate the regulation studies in our country. Of course, the success of regulations on transboundary technologies is possible and measured by their compatibility with each other.
[1]Crypto-Asset Markets (MiCA), https://media-exp1.licdn.com/dms/document/D4E1FAQF7u4wvdClqZg/feedshare-document-pdf-analyzed/0/1664979501646?e=1666224000&v=beta&t=QoVrcGikUxlGlPYPlBiXlQnKYPQ1666224000
[2]Crypto Currency Regulation Summary, Nasdaq, 2022
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