MiCA - the EU's response to crypto regulation

MiCA is a regulatory framework adopted by the EU to create a harmonised and uniform framework for crypto-assets within the single market. The legislation is a part of a broader digital finance package and aims to ensure , inter alia, innovation in the digital finance sector, protecting investors and maintaining financial stability. One of the aims of MiCA is to ensure that actors dealing with crypto-assets comply with common rules and thereby create legal certainty and predictability.

A step towards greater transparency

Since 30 June 2024, rules apply to certain issuers of crypto-assets in the EU, which means that companies may need to apply for authorisation from the Swedish Financial Supervisory Authority (Finansinspektionen) and, among other things, produce a so-called “white paper” for offers to the public. MiCA entered into force in its entirety on 30 December 2024, which also entails authorisation requirements for companies that provide “crypto-asset services” and which means, inter alia, that companies that are currently active in the crypto industry may need to assess whether they are subject to the authorisation requirement from this date.

“Crypto-assets and cryptocurrencies come in many different forms and have become an increasingly popular investment category over the last few years. A fundamental question for companies, investors and regulators is to determine whether a particular digital asset constitutes a crypto-asset and, if so, what type. In particular, an issuing company must assess whether a particular crypto-asset or token constitutes a financial instrument under the Swedish Securities Market Act (2007:528), in which case MiCA does not apply”, says Henrik Schön, Counsel.

MiCA does not apply to financial instruments (shares, bonds, derivatives) and so-called NFTs (non-fungible tokens) are excluded from the scope of MiCA. The Swedish Financial Supervisory Authority has repeatedly advised individuals against investing in crypto-assets, a position that has been reiterated notwithstanding that the EU regulation is now in place.

Transitional provisions give existing service providers time to adapt to the new regulatory framework. Providers that currently provide services covered by the regulatory framework have until 30 September 2025 to apply for authorisation to continue their operations. The Swedish Financial Supervisory Authority will then have three months to process the applications, which means that all existing operators must have obtained authorisation by 30 December 2025 at the latest in order not to risk sanctions or have to cease the business operations.

Technical standards and delegated rules

In addition to the Regulation itself, several technical standards (RTS and ITS) have already been introduced, and more are in the pipeline, aiming to further specify the application of certain provisions of MiCA. These standards - as in relation to other EU regulations - will play a crucial role in determining how the Regulation is applied.

For issuers and companies offering crypto-assets or related services, it is crucial to ask the following questions:

1. Is it a crypto-asset and, if so, what type? (i.e. e-money token, asset-referenced token or utility token);
2. Should the offer or promotion be directed to the general public, or should a token be admitted to trading on a trading platform?;
3. Does the company offer services related to crypto-assets, and if so, which ones? It is likely that these services will require authorisation under the new legislation.

“By creating a uniform regulatory framework for crypto-asset issuers and service providers, including requirements for authorisation, marketing materials, risk management, etc., the EU aims to promote a sustainable and legally foreseeable development of the crypto-market. At the same time, it introduces a certain transition period, giving existing providers some time to adapt to the new rules in order to continue operating. In essence, the aim is to create a more stable and legal structure for crypto-assets in the EU, to promote legal certainty, predictability and investor protection – benefiting both operators and consumers”, concludes Henrik Schön.

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What does MiCA cover?

The MiCA regulatory framework covers a wide range of crypto-assets and related activities such as:

• Stablecoins, which are crypto-assets linked to a physical currency or another underlying asset;
• Other types of crypto-assets (“utility tokens”);
• Crypto-exchanges/trading platforms, which enable trading in and with crypto-assets;
• Services related to crypto-assets, such as custody and brokerage of such assets.

Main aims and objectives

1. Investor protection: MiCA creates a legal framework that aims to protect investors and users of crypto-assets by ensuring transparency and imposing clear disclosure requirements. The rules require s to provide accurate and clear information about their products, including the risks associated with investing in crypto-assets.
2. Preventing market abuse: By introducing strict rules against market abuse, MiCA aims to safeguard the integrity in crypto markets, which can harm investors and confidence in the market as a whole.
3. Financial stability: MiCA aims to prevent crypto markets from becoming a risk to the broader economy and financial system. The regulatory framework includes specific measures to address the risks posed by significant asset-referenced tokens and e-money tokens (stablecoins), which have the potential to impact the wider economy if not properly regulated.
4. Harmonisation of rules: MiCA aims to create a single regulatory framework across the EU, facilitating cross-border activities and reducing administrative burdens for companies wishing to operate in several markets at the same time.

Key provisions of MiCA

• Licensing requirements for operators: companies wishing to provide crypto-asset services in the EU must be authorised by the relevant authority in the country where they are based. This applies, for example, to crypto exchanges and custodial services.
• White paper and marketing material requirements: MiCA requires issuers of crypto-assets to produce a so-called “white paper” (similar to a prospectus for financial instruments) and sets rules for marketing material.
• Reporting and transparency: MiCA requires firms providing crypto-asset services to report to regulators on an ongoing basis and to comply with strict rules on the provision of information to customers, which should increase transparency and enable supervision.
• Capital adequacy and reserve requirements: Some issuers will have to comply with rules on, for example, holding reserve assets and service providers will have to comply with capital adequacy requirements – this is to ensure that they have sufficient financial resources to cover potential losses or other risks.