21 March 2024

The Upcoming Markets In Crypto Assets (MiCA) Regulation – Questions And Answers

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The European Securities and Markets Authority (ESMA), the EU's securities markets regulator, has recently issued updates to the Markets in Crypto Assets (MiCA) Questions and Answers...
European Union Technology
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The European Securities and Markets Authority (ESMA), the EU's securities markets regulator, has recently issued updates to the Markets in Crypto Assets (MiCA) Questions and Answers, offering clarification on the legal framework applicable to entities that provided crypto asset services between the enactment of MiCA and December 2024. Further updates are anticipated, and the positions of the Central Bank of Cyprus and the Cyprus Securities and Exchange Commission regarding crypto-assets remain to be seen.

Article 143 (3): Grandfathering Provisions

MiCA, the Markets in Crypto-Assets Regulation, introduces significant changes in the regulation of crypto-asset service providers (CASPs) within the European Union. One crucial aspect of MiCA is the provision for grandfathering existing CASPs into the new regulatory framework. Here, we address some common questions regarding this provision:

Q: Do entities established between the enactment of MiCA and December 30, 2024, qualify for the grandfathering provision?

A: Yes. According to Article 143(3) of MiCA, entities providing crypto services before December 30, 2024, under applicable national law, are eligible for grandfathering. There is no specific initiation date constraint, meaning even entities established prior to MiCA's enactment may benefit.

Q: Can grandfathered entities passport their services to other Member States?

A: No. Grandfathered entities do not automatically receive an EU passport. Cross-border activities are permitted only if the entity complies with relevant legislation in both the home and host Member States. During the transitional period, compliance with national laws of the Member State where services are provided is necessary.

Q: Can grandfathered entities operate in Member States not allowing grandfathering?

A: No. Entities benefiting from grandfathering cannot conduct cross-border activities in Member States where this provision is not applicable. Non-grandfathered entities must obtain a MiCA authorization to provide services during the transitional period and beyond.

Article 80(2): Prohibition on Receiving Benefits for Routing Orders

Article 80(2) of MiCA addresses remuneration for routing orders received from clients. Here's what you need to know:

Q: Does the prohibition under Article 80(2) apply to both receiving/transmitting and executing orders?

A: Yes. Article 80(2) prohibits receiving benefits for both receiving/transmitting and executing orders for crypto-assets on behalf of clients. This prohibition ensures fair and transparent practices in crypto-asset services.

Article 60: Notification Procedure for Credit Institutions

Article 60 of MiCA outlines the notification procedure for credit institutions providing crypto-asset services:

Q: What crypto-asset services can a credit institution provide under the Article 60 notification?

A: Credit institutions can offer any crypto-asset services under the Article 60 notification procedure. However, compliance with national laws transposing Directive 2013/36/EU (CRD) is essential, as banking licences may vary across Member States.

Q: To which National Competent Authority (NCA) should the notification be submitted?

A: Article 60 notifications should be submitted to the MiCA competent authority responsible for authorizing CASPs under Article 62. Additionally, notification may be provided to authorities authorized under other EU financial legislation.

Understanding MiCA's provisions is crucial for existing and new crypto-asset service providers operating within the EU. Compliance with these regulations ensures stability, transparency, and consumer protection in the rapidly evolving crypto market.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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