We have reviewed the relevant regulatory and commercial environment in Europe, the United States and the UAE.
In September 2020, the European Commission published a draft regulation on crypto-assets, the so-called Markets in Crypto-assets (MiCAs) regulation. The European Parliament adopted its negotiating position on March 14, 2022, which cleared the way for the formal "trilogue” between the European Commission (the Commission), Council, and Parliament. On June 30, 2022, the trilogue negotiations resulted in an agreement whereby, after formal adoption by the Council and the Parliament, the regulation could enter into force over the course of this year. Then, according to the current draft, it would take effect 18 months after its promulgation.
On June 30, 2022, the trilogue negotiations resulted in an agreement whereby, after formal adoption by the Council and the Parliament, the regulation could enter into force over the course of this year. Then, according to the current draft, it would take effect 18 months after its promulgation.
As a regulation, MiCA will have direct effect in all EU member states, while creating an EU-wide and uniform set of regulations with regard to crypto and other digital assets. It contains measures to achieve objectives such as transparency, disclosure, authorization, and supervision of transactions in relation to the distribution, issuance, and trading of crypto and digital assets. This is intended to create comprehensive consumer protection and at the same time establish measures against criminal activities such as market manipulation, money laundering, and terrorist financing in all EU member states.
MiCA imposes strict rules regarding the authorization and licensing of financial intermediaries and therefore will have the greatest impact on issuers, service providers, and trading venues – which, however, serves the interest of achieving a secure EU-wide crypto financial market.
Measures such as increased information requirements with the aim of informing potential buyers about the characteristics, function, and risks of crypto token and digital assets are enshrined in detail. The requirements for the information document to be prepared for this purpose – the so-called “white paper” that must be submitted to the relevant financial supervisory authority – are regulated in article 5 of the MiCA regulation.
It must include detailed descriptions of the issuer, the issuer's project, and the type of crypto-asset to be offered or for which admission to trading is sought. Also required is a description of the rights and obligations associated with the crypto-assets and the disclosure of information about the underlying technologies and standards that the crypto-assets issuer uses to enable holding, storing, and transferring the crypto-assets. Likewise, a detailed description of the risks associated with the respective assets is mandatory.
MiCA also includes rules on capital requirements for custody of assets and a mandatory complaint procedure available to investors. Issuers of significant asset-backed cryptocurrencies (global stablecoins) would be subject to more stringent requirements, for example, with respect to required capital, investor rights, and oversight.
Further, MiCA determines that crypto service providers, such as crypto-asset custodians and operators of trading venues, must have a registered office in a member state if they want to offer their products and services in the European Union.
- Purchasers should be aware of basic due diligence steps when investing in cryptocurrencies.
- Regulators are moving rapidly from enforcement actions toward more regulatory clarity.
- The Markets in Crypto-assets (MiCA) regulation will create an EU-wide and uniform set of regulations.
- The UAE is positioning itself as a legal and regulatory center for the metaverse.