EU plans to regulate markets in cryptoassets, cryptoassets issuers and cryptoasset service providers (MiCA) are close to fruition following provisional agreement by the Council presidency and European Parliament (still subject to approval by the Council itself and Parliament, then formal adoption). Further updates to follow in due course.
The new MiCA framework will be distinct from the anti-money laundering requirements for cryptoasset exchange and custodian wallet service providers. Separately, the EU has also announced provisional political agreement on a regulation to require cryptoasset service providers to collect and make accessible certain information about the originator and the beneficiary of cryptoasset transfers (recasting the Wire Transfer Regulation).
Cryptoasset service providers (CASPs) will need an authorisation in order to operate within the EU. National regulators will have only three months to process applications. This seems very unlikely to be adhered to in practice, at least from date of filing. Regulators will likely require applications to be complete and to have been virtually pre-approved before being subject to such a tight deadline.
CASPs whose parent company is based in high risk countries for money laundering activities or tax purposes will need to implement enhanced AML checks on customers. Such CASPs' shareholders and/or management may also need to be based in the EEA.
The European Banking Authority (EBA) will maintain a public register of non-compliant CASPs.
Non-fungible tokens (NFTs), which in practical terms are only considered by the authorities to be "digital assets representing real objects like art, music and videos" will be excluded from the scope unless they fall under regulated crypto-asset categories. That position will be assessed for 18 months and a specific regime for NFTs may be introduced.
Stablecoins will need to be backed by a sufficiently liquid reserve, minimum liquidity requirements and a 1/1 ratio of stablecoins to reserve, part of which must be in cash deposits. Every holder will have to be offered the right to redeem their stablecoins at any time, free of charge. Stablecoins will be supervised by the EBA, and issuers must have a presence in the EU.
Issuers of Asset-referenced tokens (ARTs) based on a non-European currency will need to have a registered office in the EU.
MiCA will also cover any type of market abuse related to any type of transaction or service, notably for market manipulation and insider dealing. This will represent an enormous change for cryptoasset markets.
Further updates to follow in due course.