MICA regulates the EU issuance, offering to the public and admission to trading of 3 types of crypto assets, and licenses crypto-asset service providers (CASPs). It sets out a market abuse regime, disclosure and transparency requirements, governance, prudential and safeguarding requirements.
It covers Electronic Money Tokens (EMTs): a stablecoin intended to be used as a means of payment referencing the value of one official currency; Asset-Referenced Tokens (ARTs): a type of crypto asset that is not an EMT whose value is backed by other assets; and Other tokens: a catch-all category of crypto assets which are neither EMTs or ARTs and may include other forms of stablecoins and utility tokens controlled by a stabilisation mechanism.
It does not apply to deposits, central bank digital currencies, or to tokenised securities which constitute financial instruments under MIFID. It does not apply to fully unique non-fungible assets (such as art works) or to fully decentralised financial applications (with no intermediary in a decentralised autonomous organisation) or where there is no identifiable issuer. Currently MICA does not contemplate borrowing or lending of crypto assets including EMTs.
MICA contemplates an intermediated market for crypto assets and CASPs must be authorised under MICA if not already authorised under MIFID/CRD or EMD. CASPs making payments and holding funds for their clients should be authorised to do so under relevant regulations. Only legal persons established in the EU can issue or provide services under MICA; there is no third country regime and only very limited reverse solicitation is possible.
The list of CASP services and activities is very similar to MIFID and covers custody, operation of a trading platform, exchange of crypto assets for funds or other crypto assets, execution of orders, placing, reception and transmission, advice, portfolio management, transfer services.
CASPs providing custody are subject to stringent safeguarding rules and cannot encumber or use crypto assets for their own account. Custodians of reserve assets for ARTs have strict liability for loss of reserve assets (to the issuer or to the crypto-asset holders) unless they can prove that the loss is as result of an event beyond their reasonable control. This is similar to depositary liability under AIFMD and UCITs. They are also liable for any losses due to an ICT incident including cyber-attack, theft or malfunction.
Holders of EMTs have the right of redemption at par of the official currency at any time. Holders of ARTs have the right of redemption at any time in funds or in specie from assets referenced by the token. Reserve assets can only be invested in highly liquid financial instruments with minimal adverse price effect during rapid liquidation. Only the NCA can stay redemption rights.
Issuers must publish a crypto-asset white paper containing information about the crypto project, the technology, the terms of the offer and other mandatory disclosures, including key risks and safeguards. The white papers do not need to be approved by the NCA. Issuers are also subject to recovery, redemption and resolution plans.
