The MiCA regulation (Markets in Crypto-Assets Regulation) is a legal framework adopted by the European Union (EU) to regulate the use, oversight, and development of crypto-assets within the EU. Coming into force in 2023 and fully applicable from December 30, 2024, it aims to create a secure and transparent digital market for sector participants, including token issuers, crypto-asset service providers, and investors.
What is the objective of the MiCA regulation?
The regulation seeks to address gaps surrounding crypto-assets by defining clear rules to protect consumers, mitigate risks related to fraud, money laundering, or volatility, while fostering technological innovation. MiCA applies to a broad change of assets, such as stablecoins, utility tokens, and other forms of tokens not covered by existing financial regulations.
MiCA covers several key areas, including the public offering and admission to trading of crypto-assets, as well as the issuance and trading of stablecoin. It also addresses the provision of crypto-asset services by service providers and the prevention of market abuses related to crypto-assets.
It replaces national regulations adopted by some EU member states, subject to a transition period to be specified later. Consequently, the French legal framework established by the PACTE law of May 22, 2019, which had introduced specific rules for Initial Coin Offerings (ICOs) and Digital Asset Service Providers (DASPs), will be phased out.
Who is affected by the MiCA regulation?
Concerned actors.
MiCA applies to both individuals and legal entities engaging in activities such as issuing, publicly offering, or listing crypto-assets for trading, as well as those providing related services within the European Union.
According to MiCA, crypto-assets are defined as a digital representation of the value of rights that can be transferred and stored electronically using distributed ledger technology or similar mechanisms.
Exclusions from the scope.
MiCA explicitly excludes the following cases:
- Crypto-assets classified as financial instruments: These fall under regulations applicable to financial instruments, as defined by the MiFID II directive (Directive 2014/65/EU). The European Securities and Markets Authority (ESMA) provides guidelines to determine whether a crypto-asset qualifies as a financial instrument.
- Products already covered by other EU regulatory frameworks, including:
- Deposits and structured deposits.
- Funds and securitization positions.
- Insurance, life insurance, and reinsurance products.
- Certain pension solutions.
- Crypto-asset lending and borrowing activities: These remain subject to national regulations in the respective member states.
- Non-Fungible Tokens (NFTs): NFTs are excluded if their characteristics and usage make them neither fungible nor interchangeable with other crypto-assets. This includes digital art, collectibles, and unique asset-backed services. However, case-by-case assessments are required.
Crypto-asset service production.
Defined services under MiCA.
MiCA defines several crypto-asset services, including:
- Custody and administration of crypto-assets on behalf of clients.
- Operation of a crypto-asset trading platform.
- Exchange of crypto-assets against fiat currency or other crypto-assets.
- Execution of crypto-asset orders on behalf of clients.
- Placement of crypto-assets.
- Reception and transmission of crypto-asset orders on behalf of clients.
- Provision of crypto-asset investment advice and portfolio management.
- Provision of crypto-asset transfer services on behalf of clients.
Authorized actors for providing crypto-asset services.
Required authorizations.
From December 30, 2024, only authorized Crypto-Asset Service Providers (CASPs) will be allowed to operate. Authorization can be obtained through:
- A licence issued by the national competent authority, allowing an entity to function as a CASP.
- Notification to the national authority, applicable to certain service categories if the entity is already licensed under statuses such as a credit institution, central securities depository, investment firm, market operator, e-money institution, or investment fund manager.
Transitional provisions.
Providers active before December 30, 2024, in compliance with national laws, may continue operating during a transition period defined by each country, up to July 1st, 2026 (maximum 18 months). This period applies until they obtain or are denied authorization under MiCA.
General and specific obligations of CASPs.
CASPs must comply with MiCA’s requirements, which include general and specific obligations. General obligations apply uniformly to all services, while specific requirements depend on the nature of each service provided.
By obtaining authorization under MiCA, CASPs can benefit from the EU passport mechanism, enabling them to operate across all EU member states.
Crypto-asset service providers are required to comply with a set of rules common to all services provided. These obligations include general requirements, conduct standards, prudential requirements, and governance criteria.
First of all, under the general obligations (Article 59), CASPs must be established as a legal entity with their registered office located in an EU member state where they carry out at least part of their crypto-asset-related services. Additionally, at least one of the executives must reside in the EU, and the company must ensure an effective managerial presence within the EU.
The conduct obligations (Article 66) require CASPs to act honestly, fairly, and professionally, taking their clients’ interests into account as best as possible. They must provide clear, reliable, and non-misleading information, including in their promotional communications. They are also required to inform the public about the climate and environmental impacts of the consensus mechanisms used to issue crypto-assets. Furthermore, providers must warn their clients about the risks associated with crypto-asset transactions and ensure full transparency regarding the costs of the services provided.
Regarding prudential requirements (Article 67), CASPs must have appropriate financial guarantees. This includes a minimum own funds requirement, determined based on the type of service provided, or a threshold based on a percentage of the previous year’s fixed operating expenses. This amount must be adjusted to meet regulatory requirements.
CASPs must also comply with governance requirements (Article 68). This includes the competence and integrity of their executives and shareholders, as well as the regular review of operational processes. Additionally, they must have adequate resources to maintain business continuity, manage risks, and handle data. A business continuity policy must be in place, with specific plans to manage information and communication technologies (ICT), in accordance with the DORA regulation (Digital Operational Resilience Act).
Regarding client asset management (Article 70), CASPs must adhere to strict rules on the safekeeping of client crypto-assets and funds. This includes obligations for asset segregation and deposit with financial institutions such as central banks or credit institutions, with protective measures in place in the event of insolvency.
Providers must also establish clear and effective complaint handling procedures (Article 71). They must set up transparent procedures to address client complaints in a timely, fair, and consistent manner. These procedures must be published, and the results of complaint reviews must be communicated within reasonable timeframes.
In order to manage conflicts of interest (Article 72), CASPs must implement effective policies and procedures to identify, prevent, manage, and disclose conflicts of interest. They must also inform clients, in a visible manner on their website, about potential sources of conflicts and the measures taken to mitigate them.
Regarding the outsourcing of services (Article 73), CASPs must take all necessary measures to avoid any additional operational risk, remaining fully responsible for the outsourced services. Lastly, they must have an orderly liquidation plan (Article 74) in place to ensure the continuity or restoration of essential activities in the event of cessation of their operations, with clear procedures for the liquidation of their activities.
Specific obligations depending on the services provided.
The MiCA regulation also establishes specific rules depending on the services provided by crypto-asset service providers (CASPs).
Custody and administration of crypto-assets on behalf of clients (Article 75).
CASPs offering custody and administration services must structure their contractual agreements with clients, including details about the responsibilities of each party, security and authentication systems, and applicable fees. They must record clients’ positions and segregate client assets from those belonging to the custodian, especially in cases of insolvency. Securing crypto-assets and cryptographic keys is crucial to minimize the risk of loss. Additionally, outsourcing these services is only permitted to other licensed custodians in accordance with the MiCA regulation.
Operation of a crypto-asset trading platform (Article 76).
CASPs that operate crypto-asset trading platforms must establish procedures for admitting crypto-assets for trading. They must implement access rules for platform participants and conduct customer due diligence. Trading must be carried out in a fair and orderly manner, with efficient order execution and transaction settlement. The platform must also ensure continuous access to trading, with liquidity thresholds and regular market communication obligations. If necessary, certain circumstances must lead to the suspension of crypto-asset trading. Platforms cannot trade on their own account, and trading systems must be resilient, even under stressful conditions. Finally, transparency must be ensured before and after trading, with particular attention given to detecting and preventing market abuse. Transactions must be settled within 24 hours of execution, or by the end of the day if settlement does not occur on the blockchain.
Exchange of crypto-assets for funds or other crypto-assets (Article 77).
For this service, CASPs must adopt a non-discriminatory commercial policy and specify the profile of clients they accept. They are required to execute client orders at the displayed price at the time the order is finalized. Additionally, CASPs must transparently publish information on price determination, order finalization conditions, and transaction details, including volumes and prices.
Execution of orders on crypto-assets on behalf of clients (Article 78).
CASPs must ensure the best possible execution of their clients’ orders, taking into account factors such as price, cost, execution speed, settlement finality, and the security conditions of the crypto-assets.
Placement of crypto-assets (Article 79).
When placing crypto-assets, CASPs must provide clear information to the issuer or the person seeking to admit crypto-assets for trading, including details on the minimum or guaranteed placement amount, fees, the procedure followed, and the targeted buyers. The issuer’s agreement is required before the placement. Strict rules are also in place for managing conflicts of interest, particularly in situations where placements are made with the CASP’s clients or when there are incentives from the issuer.
Reception and transmission of orders on crypto-assets on behalf of clients (Article 80).
CASPs must transmit client orders promptly and efficiently, while prohibiting incentives for routing orders to specific platforms. Additionally, the misuse of information related to client orders is strictly prohibited.
Provision of crypto-asset advice and portfolio management services (Article 81).
When providing crypto-asset advice or portfolio management services, CASPs must assess the suitability of the clients for the crypto-assets or services offered, taking into account their knowledge, investment experience, risk tolerance, and financial situation. They must ensure that the information gathered about clients is reliable and updated every two years. CASPs must not provide services when they are deemed unsuitable for the clients. It is also important to specify whether the advice is independent and to disclose all costs and fees associated with providing the services, including third-party compensation. When the advice is independent, the crypto-asset portfolio must be diversified and not limited to assets related to the CASP or entities with economic ties to it. CASPs must ensure that individuals providing advice have the necessary qualifications and provide clients with periodic statements of portfolio management activities.
Provision of crypto-asset transfer services on behalf of clients (Article 82).
Finally, for crypto-asset transfer services, CASPs must enter into a contract with each client, specifying the obligations of both parties, the terms of the service, the security systems used, as well as the applicable fees. The contract must also define the governing law of the agreement.
Submission of a request for CASP authorization.
Although the MiCA regulation entered into force on December 30, 2024, it has been possible since July 1, 2024, to submit an application for authorization to become a crypto-asset service provider (CASP) to the Financial Markets Authority (AMF). This application is processed by the AMF’s services, but the granting of the MiCA authorization can only take place once the regulation is officially applied.
Public offering of tokens.
The MiCA regulation regulates the public offering and admission to trading of crypto-assets, distinguishing between asset-backed tokens or electronic money tokens, and other crypto-assets. It establishes a mandatory framework for public offerings and admission to trading on a platform, replacing the optional regime under the PACTE law.
The MiCA regulation requires issuers to publish a white paper detailing, among other things, the project, the rights of holders, the technology used, and the associated risks. This document, notified to the competent authority (in France, the AMF) at least 20 business days before its publication, must include a justification for any potential exclusions from the MiCA regulation, the concerned member states, and the date of the offering.
Certain offerings are exempt, particularly if their total value does not exceed 1,000,000 euros over 12 months, if they are addressed to fewer than 150 people per member state, or if they are intended solely for qualified investors.
Any modifications to the white paper or commercial communications must be notified to the AMF 7 business days before their publication, along with supporting documents and an update date.
Market abuse in crypto-assets.
The MiCA regulation includes measures to detect and prevent market abuse in crypto-asset markets. It establishes rules aimed at prohibiting certain behaviors, such as insider trading, the disclosure of confidential information, and market manipulation.
The MiCA regulation includes measures to detect and prevent market abuse in crypto-asset markets. It establishes rules aimed at prohibiting certain behaviors, such as insider trading, the disclosure of confidential information, and market manipulation.
These rules apply not only to transactions conducted on trading platforms but also to all crypto-asset transactions, whether they occur on or off these platforms.
All professional actors involved in crypto-asset transactions, including CASPs, must implement systems to prevent and detect market abuse. This particularly applies to those who manage trading platforms, exchange crypto-assets for funds or other crypto-assets, execute orders for clients, or offer portfolio management services.
Conclusion.
The MiCA regulation marks a decisive turning point for the crypto-asset ecosystem in Europe, establishing a harmonized and ambitious legal framework. It aims to strengthen investor confidence while promoting innovation in a secure environment. While its adoption promises a more transparent and structured market, its practical implementation will present challenges for industry players. Rigorous preparation and proactive adaptation will be essential to leverage the opportunities offered by this new regulatory ecosystem.
