Practical guide to the MiCA Regulation: when it applies and who it affects

Practical guide to the MiCA Regulation: when it applies and who it affects

The Regulation (EU) 2023/1114, commonly referred to as the MiCA Regulation, establishes a uniform regulatory framework across the European Union for the issuance of previously unregulated crypto-assets and for the service providers operating with them.

For businesses, MiCA represents a paradigm shift: it provides legal certainty, clear operational safeguards within the EU, and a regulated environment that fosters investment, sector professionalisation, and user trust.

Objectives of the MiCA Regulation

Its overarching objectives are to:

• Promote innovation within a legally secure environment;
• Protect users through harmonised standards of transparency, governance, and supervision.

The Regulation addresses five essential areas:

• Transparency and disclosure rules for the issuance, public offering, and admission of crypto-assets to trading platforms.
• Authorisation and supervision of service providers and issuers of asset-referenced tokens (ART) and e-money tokens (EMT).
• Organisational, prudential, and governance requirements.
• Protection of token holders and clients, including clear information, equal treatment, and withdrawal rights. Prevention of market abuse, including measures against manipulation, insider dealing, and unlawful disclosure of inside information.

Scope of application and categories of Crypto-Assets

MiCA distinguishes three main categories of crypto-assets:

1. E-Money Tokens (EMT): crypto-assets referencing an official currency and designed to maintain a stable value relative to it.
2. Asset-Referenced Tokens (ART): crypto-assets referencing one or several assets and intended to maintain a stable value through such reference.
3. Other Crypto-Assets that are neither ART nor EMT.

This classification determines which obligations apply to the issuer and, where relevant, the service provider.

Accordingly, the MiCA Regulation applies whenever an activity involves any of these categories and is carried out within the European Union.

Issuers and Crypto-Asset Service Providers

Issuers of these crypto-assets must:

1. Be a legal entity.
2. Publish a clear and accurate whitepaper.
3. Act honestly, professionally, and transparently.
4. Provide adequate information to investors and manage conflicts of interest.
5. Assume liability for the information they provide and grant users a right of withdrawal.

Example: a company launching a utility token granting access to digital services must comply with these obligations.

Obligations of Asset-Referenced Tokens

Given their potential financial impact, ART issuers are subject to stricter compliance obligations. Their main duties include:

Structural and authorisation requirements

• Being a legal entity established in the EU.
• Obtaining authorisation from the home Member State, except for credit institutions (which only need an approved whitepaper).

Transparency and liability

• Publishing the whitepaper and all related communications on their website.
• Assuming liability for damages caused by incorrect information.

Holder protection

• Ensuring redemption at any time at market value or delivering the underlying assets.
• Communicating fairly, clearly, and without misleading information.
• Acting in the best interest of all holders and ensuring equal treatment.
• Implementing effective complaints-handling procedures.

Prudential requirements and reserve management

• Maintaining sufficient and segregated reserve assets to cover all liabilities towards holders.
• Holding own funds equal to the highest of: EUR 350,000; 2% of the average value of reserve assets; One quarter of the previous year’s fixed overheads.
• Preparing recovery and redemption plans.

Obligations of E-Money Tokens

As EMT function similarly to electronic money, issuers must comply with requirements comparable to those applicable under existing e-money legislation:

Structural requirements

• Being an authorised credit institution or electronic money institution.

Transparency and liability

• Publishing a whitepaper and assuming liability for inaccuracies.

Issuance and redemption rules

• Issuing tokens at nominal value upon receiving funds.
• Ensuring redemption at nominal value at any time.

Reserve asset management

• Investing received funds only in secure, low-risk assets denominated in the same currency.
• Depositing funds in an independent account with a credit institution.

Continuity plans

• Preparing recovery and redemption plans.

The European Banking Authority (EBA) may classify certain ART or EMT as “significant”. These issuers must comply with additional requirements and will be subject to enhanced supervision.

Crypto-asset service providers (CASP)

As for crypto-asset service providers, which will be referred to as CASP, MiCA defines it as legal persons or undertakings that provide one or more crypto-asset services professionally to clients and hold an authorisation in accordance with Article 50.

This includes, among others: exchanges, custodians, trading platforms, brokers, and advisors.

To operate within the EU, CASPs must be legal persons established in a Member State and must:

1. Act honestly, fairly, and professionally in the best interest of clients.
2. Provide clear, accurate, and non-misleading information on services, risks, pricing, and fees.
3. Maintain minimum own funds and prudential guarantees.
4. Segregate client assets and refrain from using them for own-account purposes.
5. Apply effective AML/CFT measures and conflict-of-interest policies.
6. Establish transparent and effective complaints-handling procedures.
7. Implement appropriate controls when outsourcing and maintain a plan for the orderly wind-down of activities.

CASPs are also subject to specific rules on market abuse, acquisitions involving ART/EMT issuers, and coordinated supervision by national authorities, the EBA and the European Securities and Markets Authority (ESMA).

Situations excluded from MiCA

The MiCA Regulation does not apply to:

• Crypto-assets already regulated under other EU financial services laws (e.g., financial instruments, pension products, insurance products).
• Intra-group crypto-asset services (between parent companies and subsidiaries) or services provided by liquidators or insolvency administrators.
• Activities carried out by EU public institutions such as the ECB, national central banks, the EIB, or European stability mechanisms.
• Crypto-assets that are unique and non-fungible, such as certain types of NFTs.