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Crypto Regulations – MiCA in Focus

What is MiCA and why is it being introduced?

Markets in Crypto-Assets (MiCA) was signed in June 2022, and is the latest legislation introduced by the European Union (EU) regarding digital assets. MiCA aims to provide legal clarity and certainty by creating a standard, EU-wide framework on the issuance and provision of crypto-assets and services. It does this by categorising and defining market participants (Crypto-asset issuers and Crypto-asset service providers) and tokens. 

This EU initiative eliminates the patchwork of national regulations which are insufficient for the cross-border nature of crypto, whilst raising consumer protection and reducing risks to financial stability.  Similarly, by providing legal clarity, MiCA gives businesses the certainty required to invest, innovate, and compete. BCB, with its regulatory first approach, welcomes the advent of MiCA and will ensure we meet any requirements within the two year grace period (2024). 

Crypto-asset issuers (CAI) and Crypto-asset service provider’s (CASP)

MiCA classifies crypto-market participants into Crypto-asset issuers (CAI) and Crypto-asset service providers (CASP). Previously, these participants were required to follow regulations from each EU country in which they operated, causing obvious bureaucratic issues. With the introduction of MiCA, participants are required only to follow rules dictated by MiCA. This approach is in keeping with consumer protection, whilst ensuring harmonised access to crypto-asset innovation throughout the single market. The definition of these participants and the regulations they must follow are explained below. 

A Crypto-asset issuer (CAI) is any entity that issues any of the three types of crypto-assets listed above. A CAI is required to produce a whitepaper explaining the characteristics, rights, obligations, and underlying technology of their project. CAI’s will be liable for any misleading information in whitepapers and must warn consumers about risks associated with crypto-assets. Importantly, consumers will have a 14-day right to withdraw after purchasing a non-listed crypto-asset token, protecting them in a similar manner to the offline world.

Second, MiCA has classified Crypto-Asset Service Providers (CASP) as any person whose occupation or business is the provision of one or more crypto-asset services to third parties on a professional basis. CASP’s are required to establish prudential safeguards, organisational requirements, and rules on the safekeeping of clients’ crypto-assets and funds. Moreover, they must establish a complaint handling procedure and cooperate on issues of conflict of interest and outsourcing. Interestingly, MiCA also necessitates that CASPs disclose their environmental impact prominently on their website, highlighting the sustainability spotlight shining on the industry. Any CASP that does not follow these rules may be put on a crypto blacklist by the European Securities and Markets Authority (ESMA).

Token categorisation 

The majority of crypto–assets which are not already governed by other regulations, such as security tokens and central bank digital currencies, shall fall into the scope of MiCA. These are categorised, allowing regulations to be applied in proportion to perceived risk. 

Asset-referenced tokens

Utility tokens

  • A token providing digital access to a good or service available on DLT. 
  • Only accepted by its issuer. 
  • E.g. Chainlink (LINK); Basic Attention Token (BAT)

Electronic money tokens

  • Main purpose is to be used as a means of exchange. 
  • Pegged to a single fiat currency. 
  • E.g. USDC and EUROC.

MiCA and Stablecoins

MiCA introduces specific legislation for stablecoins (Electronic money tokens). Stablecoins are scrutinised by investors and regulators alike who frequently question the validity of their reserves. To end this uncertainty, MiCA legislates that stablecoins must be backed 1:1 by reserves which are legally and operationally segregated. These funds must be fully protected in case of insolvency. This clarity should instil confidence for market participants. 

The European Commission (EC) is wary of ‘global stablecoins’, which the BIS argues could disturb financial stability. To counteract this, MiCA restricts the transaction volume of each stablecoin to €200m per day. For ‘significant’ stablecoins with over 10m users or €5bn worth in circulation, supervision will fall to the European Banking Authority (EBA). These restrictions are especially interesting given the 24-hour daily volumes of Tether (USDT) is equivalent to €48.13bn, with USDC at €6.412bn respectively. How MiCA would enforce these rules for decentralised stablecoins is yet to be determined. 

For more information, please visit: https://www.consilium.europa.eu/en/press/press-releases/2022/06/30/digital-finance-agreement-reached-on-european-crypto-assets-regulation-mica/ 


BCB Group comprises BCB Prime Services Ltd (UK), BCB Payments Ltd (UK), BCB Digital Ltd (UK) and BCB Prime Services (Switzerland) LLC. BCB Payments Ltd is regulated by the Financial Conduct Authority, no. 807377, under the Payment Services Regulations 2017 as an Authorised Payment Institution. BCB Prime Services (Switzerland) LLC, a company incorporated under the laws of the Swiss Confederation in the canton of Neuchâtel with business identification number CHE-415.135.958, is an SRO member of VQF, an officially recognized self-regulatory organization (SRO) according to the Swiss Anti-Money Laundering Act. This update: 14 Oct 2020.

The information contained in this document should not be relied upon by investors or any other persons to make financial decisions. It is gathered from various sources and should not be construed as guidance. The information contained herein is for informational purposes only and should not be construed as an offer, solicitation of an offer, or an inducement to buy or sell digital assets or any equivalents or any security or investment product of any kind either generally or in any jurisdiction where the offer or sale is not permitted. The views expressed in this document about the markets, market participants and/or digital assets accurately reflect the views of BCB Group. While opinions stated are honestly held, they are not guarantees, should not be relied on and are subject to change. The information or opinions provided should not be taken as specific advice on the merits of any investment decision. This document may contain statements about expected or anticipated future events and financial results that are forward-looking in nature and, as a result, are subject to certain risks and uncertainties, such as general economic, market and business conditions, new legislation and regulatory actions, competitive and general economic factors and conditions and the occurrence of unexpected events. Past performance of the digital asset markets or markets in their derivative instruments is not a viable indication of future performance with actual results possibly differing materially from those stated herein. We will not be responsible for any losses incurred by a client as a result of decisions made based on any information provided.

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