After many delays, the European Parliament has approved the long-awaited proposed regulation on markets in cryptoassets (MiCA), alongside the proposed regulation on information accompanying transfers of funds and certain cryptoassets (the Recast EU Wire Transfer Regulation, or WTR2).
The aim of the draft regulations is to create a uniform legal framework for cryptoasset markets in the EU, thereby making the EU one of the first major jurisdictions to have formal legislation regulating cryptoassets. The texts now require formal endorsement by the European Council, after which they will be published in the EU Official Journal. We expect that they will enter into force in June, with the majority of the provisions of MiCA expected to apply in 2024.
For firms preparing for the application of MiCA, focus will soon turn to the European Securities and Markets Authority and the European Banking Authority, which are responsible for the various technical standards required thereunder. It is only once we have these technical standards that we will see the granular details on how MiCA will be applied.
Set out below are brief overviews of each of the legislative measures. A statement released by the European Parliament is available here and the approved texts of MiCA and WTR2 are available here and here.
MiCA is designed to regulate those cryptoassets that are not already covered by existing EU financial services legislation, such as the Markets in Financial Instruments Directive. Key provisions include transparency, disclosure and authorisation requirements for persons issuing cryptoassets (including asset-reference tokens and e-money tokens) in the EU. MiCA also extends the EU’s market abuse regime to cryptoassets. Notably, MiCA does not cover non-fungible tokens and decentralised finance.
WTR2 aims to ensure that, as is the case with traditional money transfers, transfers of cryptoassets can be traced and blocked if they are suspicious. WTR2 implements the so-called ‘travel rule’, pursuant to which information on the source of the asset and its beneficiary are linked to any given transaction.