Representatives of the European Parliament and the Council of the European Union reached a provisional political agreement on the proposed ‘MiCA’ regulation governing the European crypto-asset market in the evening of Thursday 30 June, hours before the end of the French Presidency of the EU Council (see EUROPE 12968/2).
“MiCA is a European success. We are the first continent to have a crypto-asset regulation”, welcomed the European Parliament’s rapporteur Stefan Berger (EPP, Germany) in a statement. “Tokenisation will be as ground breaking for the financial world as the introduction of the joint market was in the 17th century”, he says. For French Finance Minister Bruno Le Maire, the ‘MiCA’ regulation “confirms the EU’s role in setting standards for the digital sectors”.
Intended to come into force one year after its publication in the Official Journal of the EU, the new legal framework will aim to foster innovation in the evolving crypto-asset and ‘stablecoin’ market, preserve market integrity and financial stability, and protect consumers.
Among other things, consumers will be better informed about the risks and costs associated with crypto-assets and service providers will now be liable in the event of loss, except in exceptional circumstances.
Established in the EU and supervised by the European Banking Authority (EBA), issuers of ‘stablecoins’ will have to build up a sufficiently liquid reserve, with a ratio of 1:1 and partly in the form of deposits. Each holder of ‘stablecoins’ will be able to redeem them at any time and free of charge from the issuer.
Authorisation. Crypto-asset service providers will have to obtain an authorisation from the supervisor of the Member State in which they are established, with the deadline for obtaining the authorisation set at 3 months. A sunset clause of 18 months has been introduced to allow providers already accredited in a Member State under national legislation to obtain accreditation under the future regulation.
As agreed in the revision of the ‘TRF’ Directive, the European Securities and Markets Authority (ESMA) will set up a public register of crypto-asset service providers (CASPs) that provide services in the EU without authorisation.
“There will be a ‘name and shame’ list of unauthorised actors”, confirmed a source in the French Finance Ministry (Bercy) on Friday 1 July.
In addition, the text includes measures against market manipulation and the prevention of money laundering, terrorist financing and other criminal activities, as well as a revision of the directive on the transfer of funds (TRF), on which an interinstitutional agreement was reached the day before (see EUROPE 12983/7). In particular, enhanced prudential measures will target crypto-asset service providers whose parent company is located in countries on the EU’s list of high-risk third countries for money laundering and on the EU’s list of non-cooperative jurisdictions for tax purposes.
As the “EU’s new ‘crypto-sheriff’”, the ESMA will have “intervention powers to prohibit or restrict the provision of crypto-asset services by CASPs (...) in case of a threat to investor protection, market integrity or financial stability”, noted Ernest Urtasun (Greens/EFA, Spain) in a statement.
NFTs. Non-fungible tokens (NFTs) are not traded or exchanged at equivalence, like cryptocurrencies. All kinds of NFTs offered to the public at a fixed price, such as cinema tickets, digital collectibles of clothing brands or game elements in video games will be exempted from the scope of MiCA.
However, the rules envisage a possible reclassification of an NFT to become fungible either as a financial instrument subject to EU financial legislation (e.g. ‘MiFID’) or as a crypto-asset subject to MiCA.
The environmental issue had animated debates in the European Parliament (see EUROPE 12910/12). In order to reduce the high carbon footprint of cryptocurrencies, including the mechanisms used to validate transactions, major CASPs will need to disclose their energy consumption.
The ESMA will prepare regulatory technical standards on this obligation in order to provide the market with clear guidance on how such disclosures should be made. CASPs will also make information on their environmental and climate impact available to the public on their website and will forward this information to their competent national authority, which will inform the ESMA.
Within 2 years, the European Commission should provide a report on the environmental impact of crypto-assets and the introduction of mandatory minimum sustainability standards for ‘consensus mechanisms’, including ‘proof-of-work’.
‘Proof of work’ is a method of verifying and tracking the creation of new cryptocurrencies and the transactions that take place on a cryptocurrency blockchain. (Original version in French by Anne Damiani with Mathieu Bion)