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European Crypto Regulation on the Verge of Enactment | Orrick – On the Chain

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The EU’s Markets in Crypto-Assets (MiCA) regulation is currently in near final stages and may come into force this year. MiCA provides a new regulatory framework, including licensing and disclosure obligations, to participants in the cryptocurrency ecosystem, including token issuers, financial intermediaries (exchanges, brokers, etc.) and custodians.

What happened

The European Parliament’s Economic and Monetary Committee gave approval to MiCA on 10 October 2022. This is the latest step in a process that has been going on for over two years.

what’s next

This paves the way for the regulation to be approved by the larger plenary session of the European Parliament. This is often just a procedural step. Once the plenary approves her MiCA, it will become effective and the regulation will be fully enforced in the second or third quarter of 2024, marking the beginning of the 18 months that businesses must comply with.

While the MiCA text will help provide regulatory certainty to EU crypto businesses and consumers, additional practical guidelines for implementation will also be drafted to further elaborate on the MiCA. .

Goals of MiCA

MiCA’s main objective is to provide a level of regulatory and economic harmonization for crypto businesses and consumers across Europe. The basic principles of MiCA include:

  • Provides legal certainty through clear definition of crypto-assets and activities related to in-scope crypto-assets.
  • It provides consumer protection and market integrity along with financial stability for cryptocurrency businesses.When
  • Encourage innovation and fair competition in the European crypto-asset market and avoid regulatory arbitrage between Member States.

Companies engaging in activities within the scope of MiCA must, at a minimum, register with the competent regulatory authority and prepare a detailed white paper on their business in the form and content specified by MiCA.

MiCA does not apply to the UK or Switzerland as they are not members of the European Union. While similar regulatory principles may apply in these two jurisdictions, separate analysis is required to understand what cryptocurrency businesses must do to comply with local regulations. .

What MiCA Missed

The final text of MiCA omits the treatment of non-fungible tokens, decentralized finance, decentralized autonomous organizations, and proof-of-work consensus mechanisms. However, European regulators are expected to treat the split NFTs as utility tokens managed by his MiCA.

How will MiCA affect the US market?

MiCA reflects the EU’s recognition that digital assets are a permanent part of the modern financial system. It remains to be seen whether EU measures defining and regulating digital assets will affect US regulators.

Biden Administration March 2022 Presidential Decree on Ensuring Responsible Development of Digital Assets It remains the most comprehensive US policy statement on the topic. Although numerous bills have been introduced in the US Congress, the US has yet to produce comprehensive legislation or regulatory guidance. Instead, regulators have relied on enforcement action and individual agency guidance to notify market participants. The U.S. regulatory regime is expected to continue to take concerted but discrete actions, at least in the short term, in line with the executive order’s primary objective of protecting consumers and investors.

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