Background
MiCA represents the EU attempt to legislate digital assets (stablecoins) and the crypto ecosystem.
It sets out EU rules covering and applicable to:
- issuers of unbacked crypto-assets, stablecoins (Asset Reference Tokens and Electronic Money Tokens),
- trading venues’ and
- crypto-asset service providers.
MiCA is however not applicable to:
- financial instruments covered by MiFID
- crypto-wallets
- crypto-assets provided in a “fully decentralized way” without any intermediary, essentially carving out most DeFI applications
- the offering of crypto-assets (other than ARTs and EMTs) offered for free or automatically created as a reward for the maintenance of the DLT or the validation of transactions in the context of a consensus mechanism
- NFTs, as long as they are unique and not fungible.
MiCA’s main aims
The main aims of MiCA are to:
- protect investors
- ensure market integrity, and
- preserve financial stability.
While ensuring that the current legal framework does not pose obstacles to the use of new digital financial instruments, the regulation will simultaneously ensure that these fall within the scope of regulation and the operational risk management arrangements of firms active in the EU.
Timeline
MiCA is intended to become applicable in two parts:
- first part dealing with stablecoins will become applicable 12 months following its entry into force,
- second part dealing with crypto-assets service providers will become applicable within 18 months following its entry into force.
Malta’s competitive advantage
Malta will be repealing its already existing legislation and is already working to address the differences between MiCA and its current crypto legislation so as to remain ahead of other countries when the time comes to implement MiCA. This effectively mean that new crypto operators would find Malta a good option to consider.
Malta crypto legislation is based on MiFID and similarly MiCA has also been based on the same EU Directive. It is consequently expected that the impact on the existing Malta legislation will be minimal, and in some cases, MiCA will be even less stringent.
With MiCA, crypto-operators will need to be licenced in order to operate within the EU. Any third country operator which wants to offer services to citizens in the EU would also need to establish a branch which will also need to be licensed.
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