The Markets in Crypto-Assets Regulation (EU 2023/1114, MiCAR), which entered into force in June 2023, aims to create a broad EU regulatory framework applicable to crypto-assets, and any persons engaged in the issuance, public offering and admission to trading of crypto-assets as well as the provision of related services. MiCAR includes a number of Level 2 and 3 measures that must be developed prior to the new regime becoming applicable in the course of 2024. The first publication package with draft Technical Standards (both Regulatory Technical Standards (RTS) and Implementing Technical Standards (ITS) was already delivered by European Banking Authority (EBA) and European Securities and Markets Authority (ESMA) in July 2023. The second consultation package was delivered on 5 October 2023.
The consultation for the Dutch implementation of MiCAR was published in July 2023. In this news update, we will take a closer look at where we stand.
The objective of MiCAR is to address the fragmentation of the European legal framework applicable to crypto-assets and persons engaged in the issuance, offer to the public and admission to trading as well as service providers in relation to crypto-assets. MiCAR defines a "crypto-asset" as "a digital representation of a value or of a right that is able to be transferred and stored electronically using distributed ledger technology or similar technology". MiCAR outlines three types of crypto-assets: asset-referenced tokens (ARTs), e-money tokens (EMTs) and utility tokens, establishing specific rules for each type.
MiCAR will be applicable in its totality as of 30 December 2024; however, the requirements set for ARTs and EMTs (title III and IV) will apply as of 30 June 2024. With MiCAR becoming applicable gradually in the course of 2024, it is important to understand and prepare for the licensing regime, the transparency and disclosure requirements for the issuance, offering crypto-assets to the public, admission of crypto-assets to trading on a trading platform, conduct of business rules and the market abuse regime introduced by MiCAR.
Read our article in which we have provided further background information on MiCAR and the related amendment to the Transfer of Funds Regulation.
The EBA and the ESMA have been mandated to develop technical standards and guidelines specifying certain provisions. The consultations of these standards are published in three rounds, the first of which was published in July 2023 and the second in October 2023. A third and final consultation will be released in Q1 of 2024.
Second consultation package
ESMA published several new RTS and ITS in its second consultation package (October 2023). This consultation package mostly relates to five areas: (i) sustainability indicators for distributed ledgers; (ii) disclosures of inside information; (iii) technical requirements for white papers; (iv) trade transparency measure; (v) record-keeping and business continuity requirements for crypto-asset service providers (CASPs).
The technical standards submitted for consultation concern:
- Sustainability (RTS): Both CASPs and issuers of crypto-assets should report on sustainability in line with the Sustainable Finance Disclosure Regulation (SFDR) and Corporate Sustainability Reporting Directive (CSRD). Distributed Ledger Technology (DLT) and all network infrastructure involved should be taken into account in the sustainability assessment.
- Business continuity (RTS): CASPs must comply with the new Digital Operations Resilience Act (DORA) to minimize cyber threats, in addition to adequate risk management when using DLT.
- Trade transparency (RTS): Trading platforms offering crypto-assets should disclose orders and transactions continuously, as close to real-time as possible. CASPs operating a trading platform should disaggregate pre- and post-trade data for each crypto-asset which is traded on the platform.
- Content and format of order book records (RTS): CASPs are required to develop electro- and machine-readable formats in accordance with ISO 20022 methodology for all relevant data relating to crypto-asset orders. ESMA has indicated that the Digital Token Identifier (DTI) should be used as an identifier in the crypto landscape.
- Data classification of crypto-assets (RTS): The crypto-assets have to be classified and identified using a valid ISO 24165. In case of a group of crypto-assets, a Functionally Fungible Group Digital Token Identifier (FFG DTI) is used. In case of a singular crypto-asset a DTI has to be used.
- Recordkeeping (RTS): CASPs can set their own policy concerning recordkeeping but it should be uniform across the services. Additionally, it should facilitate efficient market surveillance by supervisory authorities.
- Templates white paper (ITS): ESMA has released standard forms and templates on what the crypto-asset white paper should entail and consist of. The aim is ensuring a high level of transparency and comparability of white papers, ensuring that investors are appropriately informed about the characteristics and the risks of the crypto-assets they invest in, of the issuer and the offer or admission to trading. White papers should be made available in a machine-readable format.
- Technical means on disclosing inside information (ITS): ESMA has published technical standards on what information should be published on what conditions and when disclosure can be delayed. Issuers should comply with both publication of inside information on the website and to the media to be able to reach a wide public.
The consultation package containing the provisions above is open for consultation until 14 December 2023. The following step will be to publish a final report and submit the draft of the Technical Standards to the European Commission by 30 June 2024. The entry into application will occur on 30 December 2024, unless a grand-fathering clause applies to entities providing crypto-asset services, already operating under national frameworks. In that case the entry into application will occur at the latest on 1 July 2026.
Implementation of MiCAR in the Netherlands
On 14 July 2023, the Dutch Ministry of Finance published its consultation of the draft MiCAR Implementation Act. The regulatory requirements following from the regulation itself are directly binding upon all Member States but the punitive dimensions offered some leeway to respective Member States. The Dutch Ministry of Finance has opted to not implement additional/deviating criminal or administrative sanctions in the implementation consultation.
Deliberations with relevant National Competent Authorities about shortening the liaison period between implementation and enforcement of MiCAR in relation to parties already providing crypto-asset services are ongoing. The Dutch supervisory authorities do not give out permits for crypto-asset service and only employ a registration system for entities providing crypto-asset services. The Ministry therefore looks to shorten the liaison period from 18 months to a still undetermined period. However, the intention of the Dutch Ministry is to aim for a liaison period of a maximum of six months.
The consultation of the draft MiCAR Implementation Act closed on 11 August 2023.
Earlier guidelines and consultations
The first consultation round was published in July 2023, containing mandates and guidelines on the contents of application procedures concerning authorisation as CASPs, forms and templates on the application to obtain authorisation as CASP, the complaint handling procedure and management and prevention of conflicts of interest.
Furthermore, the EBA and the ESMA have issued a number of draft guidelines on 20 October 2023, which amongst others relate to the suitability of members of management bodies of both issuers of ARTs and CASPs. Additionally, suitability guidelines have been published concerning shareholders and members with qualifying holdings in issuers of ARTs and CASPs.
The new round of consultations shows the ambitions of the EU supervisory authorities to develop MiCAR into a new pillar of European financial legislation in a quickly digitalizing financial market. The Level 2 and Level 3 measures will still entail one more consultation package in Q1 of 2024.
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