What’s in MiCA?
MiCA applies in general to crypto-assets, which are defined as “digital representations of value or rights that can be digitally transferred and retained using distributed ledger technology or analogous technologies.”
The architecture also provides three classifications of crypto assets, commencing with asset-referenced tokens. This is exemplified by libra, the stablecoin proposed by Facebook in 2019: Libra was designed to be backed by a basket of currencies and to facilitate international transactions.
Stablecoins pegged to the value of fiat currencies like the U.S. dollar are e-money tokens. To illustrate, consider the dollar-backed USDC and USDT. The third form of token enables digital access to a good or service and is recognized only by the token’s issuer, like the basic attention token (BAT) published by the web browser Brave.
It was established in 2018 to bring a standard licensing system in all EU member states and assist the crypto market, service providers and assets that presently governs out-of-scope. By 2024, the MiCA regulation will be spread across every European state and it will be mandatory for every EU member state to accept it once it is implemented.
Once any crypto company has been licensed under MiCA they will be considered as “passportable” now this fascinating word means that that particular firm can operate anywhere in the EU without any extra requirement of license by any local government.
The Markets in Crypto-Assets regulation has four primary goals:
- Establishing legal certainty by developing a solid legal structure for crypto-assets in its extent not covered by current financial services legislation;
- Encouraging innovation and competitiveness to encourage the growth of crypto-assets by implementing a secure and appropriate framework;
- Safeguarding investors, consumers, and the credibility of the market in light of the risks posed by crypto-assets; and
- Maintaining economic stability by incorporating protections to protect against potential threats to financial stability.
Regulating the associated risks with crypto-assets
The risk linked with the investment in Crypto-asset, MiCA will secure customers against those risks. Presently, if we evaluate then consumers have very restricted rights to redress or safeguard the transactions specially that is from outside EU. The service providers of crypto-asset will need to respect powerful needs to safeguard the wallet of consumers and become accountable if they lose investors MiCA rules.
Not only this but MiCA will also handle the fraudulent schemes, abuse link to any sort of service or transaction. The ESMA, which is the European Securities and Markets Authority, will propose new regulatory specifications for the substance, methodology, and demonstrate the details pertaining to the serious environmental and climatic effects. The European Commission must provide a report on the impact on the environment of crypto-assets and the execution of minimal sustainability requirements for consensus procedures, such as proof-of-work, within 2 years.
MiCA compels the European Banking Authority (EBA) to maintain a public registry of crypto-asset service providers that do not comply. The parent company of crypto-asset service providers who are situated in countries listed on the EU list of third countries deemed to pose a high risk for anti-money laundering activities and on the EU list of non-cooperative tax jurisdictions will be required to implement improved checks in accordance with the EU AML framework. Additionally, shareholders and management of CASPs may be subject to more stringent rules, particularly with relation to their localization.
Next actions
Prior to undergoing the full adoption procedure, the provisional agreement must be approved by the Council and the European Parliament. LCX is the regulated company in Liechtenstein that complies with the MiCA regulations.
