Markets in Crypto-Assets

Markets in Crypto-Assets (MiCA) is a regulation in European Union (EU) law. It is intended to help streamline the adoption of blockchain and distributed ledger technology (DLT) as part of virtual asset regulation in the EU, while protecting users and investors. MiCA was approved on 20 April 2023 by the EU Parliament but will not be fully applied until December 2024.

Title
The full name of the 24 September 2020 proposal is the "Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on Markets in Crypto-assets, and amending Directive (EU) 2019/1937 COM/2020/593 final". MiCA is part of a digital finance package that intends to transform the European economy.

Function
MiCA provides legal certainty around crypto assets – cryptocurrencies, security tokens and stablecoins. It is similar to the EU’s Markets in Financial Instruments Directive (MiFID), which is a legal framework for securities markets, investment intermediaries and trading venues. MiCA covers participants in the crypto-market, including crypto-asset issuers, trading platforms, exchanges, and custodian wallet providers. A benefit of the MiCA proposal is that it permits banks, investment firms, and other financial institutions to engage in crypto-market activities, provided they have authorization under MiFID II to offer services. It was expected to be different from the UK's crypto regulatory framework. The UK was expected to start by regulating only a few crypto assets, while the MiCA regime was expected to be broader.

History
Groundwork for MiCA started in 2018 following public interest in cryptocurrencies (by 2024 there were estimated to be 31 million crypto users in Europe ). The European Commission adopted a digital finance package, which included MiCA, in September 2020, leading to discussions among the preparatory bodies (the EU Council, the European Central Bank, the Economic and Social Committee).

After 18 months of debate, the EU passed MiCA in 2022. Regulations on stablecoins were expected to take effect in June 2024 and those affecting crypto asset service providers in the following December. However, service providers with fewer than 15 million active users in Europe would not be considered “significant” under MiCA and so would be supervised by national EU authorities rather than the European Banking Authority and the European Central Bank. Elizabeth McCaul, a member of the ECB Supervisory Board, warned of “gaps in the framework” for regulating crypto markets and that traditional approaches might not work. She said that the 15m threshold would probably exclude Binance, and FTX before its collapse. She had made similar warnings at a Financial Times conference in November 2022.

Société Générale was the first big bank to list a stablecoin under MiCA, in December 2023, on Bitstamp, an exchange based in Luxembourg.

In May 2024, the EBA published final draft regulatory technical standards (RTS) and final draft implementing technical standards (ITS) under MiCA, applicable from 30 June 2024.