European Parliament Approves Crypto-assets Legislation

On April 20, the European Parliament approved the first part of EU legislative framework for the regulation of transfers of crypto-assets such as bitcoins and electronic money tokens. Back in June 2022, the Parliament and Council agreed on the essence of crypto transfer procedure, and it was established that crypto transactions, just like any other financial operations, can always be traced, and suspicious transactions may be blocked.

The law has received the name “Digital Finance: Markets in Crypto-assets (MiCA)” (hereinafter, “MiCA Regulation”).  MiCA also covers transactions above €1000 from self-hosted wallets (a crypto-asset wallet address of a private user) when they interact with hosted wallets managed by crypto-assets service providers. The rules do not apply to person-to-person transfers conducted without a provider or among providers acting on their own behalf.

Scope of the Regulation

The Regulation concentrates on achieving full transparency and traceability of transfers of crypto-assets made by crypto-asset service providers in addition to the current provisions on transfer of funds. It lays down rules on the information on payers and payees, accompanying transfers of funds, in any currency, and the information on originators and beneficiaries, accompanying transfers of crypto-assets, for the purposes of preventing, detecting and investigating money laundering and terrorist financing. At least one of the payment or crypto-asset service providers, which is a party to the transfer, must be established in the EU.

The proposal provides for new obligations concerning the origin of transfers. Service provider exchanging crypto-assets on behalf of a customer must record their name, address, date of birth and account number, as well as the name of the intended recipient of the transfer. The crypto-asset service provider of the beneficiary must implement monitoring procedures to verify whether the originator or the beneficiary has submitted its personal information in full.

Structure and Main Definitions of the Regulation

Title I sets out that the regulation would apply to crypto-asset service providers and issuers, and establishes uniform requirements for transparency and disclosure in relation to issuance, operation, organisation and governance of crypto-asset service providers, along with consumer protection rules and measures to prevent market abuse. It sets out the terms and definitions of the referenced crypto-assets, principal ones being:

Crypto-asset is a digital representation of value or rights which may be transferred and stored electronically.

Asset-referenced token (ART) is a type of crypto-asset which is meant to maintain a stable value by referring to the value of several currencies that are legal tender (fiat currencies), one or several commodities, or one or several crypto-assets, or a combination of such assets.

E-money token (electronic money token, EMT) is a means of exchange and maintains a stable value by referring to the value of a fiat currency that is legal tender.

Asset-referenced tokens and e-money tokens are often described as “stablecoins”.

Utility token is intended to provide digital access to a good or service and is only accepted by the issuer of that token.

Titles II-IV contain authorisation rules for other crypto-assets. In particular, the issuer of a crypto-asset must be established in the form of a legal person and provide a white paper setting out the information about it as required by the Regulation.

Competent Authorities

EU Member States shall designate the national competent authorities (NCAs) responsible for carrying out the functions and duties provided by the Regulation, which will be reported to the European Business Association and the European Securities and Markets Authority. The NCAs’ powers include requiring service providers, as well as members of management bodies, to provide information and documents.

MiCA will be formally endorsed by Council and enter into force 20 days following their publication in the EU Official Journal. It is expected it will begin its implementation next year.

Press release of the Europarliament

Briefing on MiCA

Regulation of the European Parliament and of the Council on Information Accompanying Transfers of Funds and Certain Crypto-assets