The MiCa Regulation explained: What has changed since June 2024?

Aim of the MiCa Regulation

Before getting to the heart of the matter, it is worth taking a brief look at the MiCa Regulation itself.1  The MiCa Regulation aims to create a uniform European legal framework for crypto-assets issuers and service providers not covered by existing financial services regulations. It applies to the issuance, public offering, admission to trading, and provision of services related to crypto-assets. However, it does not apply to crypto-assets that qualify as financial instruments, deposits, funds, securitization positions, non-life or life insurance products, as these already fall within the scope of European financial services provisions.2  

Broadly, the MiCa Regulation defines crypto-assets as digital representations of value or rights that can be electronically transferred and stored using distributed ledger technology or similar technology.3

The MiCa Regulation distinguishes four main types of crypto-assets: 

1. E-money tokens: These are crypto-assets that purport to maintain a stable value by referencing the value of one official currency. Prominent examples of e-money tokens include USDT (Tether) and USDC (Circle), which claim to maintain their value against the USD, and EURS (Statis), EURC (Circle), and EURT (Tether), which are linked to the euro.
2. Asset-referenced tokens: These are crypto-assets that purport to maintain a stable value by referencing another value or right, or a combination thereof. A notable example is Tether Gold, which claims to maintain its value against the price of gold.
3. Utility tokens: These are crypto-assets that are only intended to provide access to a good or a service supplied by their issuer. Examples include Siacoin, used within the Sia storage network; OMG, the currency of the OMG Network; and REP, awarded to users of the Augur software.
4. Other crypto-assets: These are crypto-assets that do not fall into the e-money or asset-referenced token categories.

As of 30 June this year, only the provisions pertaining to e-money tokens and asset-referenced tokens have taken effect.

What has changed since 30 June 2024?

Since 30 June 2024, any public offering or admission to trading of e-money tokens and asset-referenced tokens is subject to a strict regulatory regime. The regime is inspired by the framework already applicable to the public offering and admission to trading of financial instruments.4

Offering to the public or admission to trading of assets-referenced tokens

Who can offer assets-referenced tokens?

Only (i) issuers that are legal persons or undertakings established within the European Union and authorised by their competent authorities under the MiCa Regulation, or (ii) credit institutions authorised under CRD IV5 , are permitted to offer asset-referenced tokens to the public or seek admission to trading within the Europen Union.6

For issuers that are not credit institutions, the authorisation process involves a fit and proper evaluation of the issuer’s management and a screening of the shareholders that have qualifying holdings in such issuers to ensure they have sufficiently good repute.7  These issuers must also adhere to prudential requirements, including maintaining a sound governance structure8 , meeting own funds requirements9 , and creating, maintaining and managing a reserve of assets to cover risks related to the assets referenced by the asset-referenced tokens and the liquidity risks associated with the redemption rights of the holders.10  

Under the well-known principle of the passport, this authorisation is valid across the EU, allowing issuers to operate in any Member State.11

If the issuer is a credit institution authorised under CRD IV, it is exempted from seeking specific authorisation under the MiCa Regulation to offer asset-referenced tokens to the public or seek admission to trading. However, they must still comply with specific requirements, such as notifying the competent authority with the information listed by the MiCa Regulation.12

In principle, only the issuer of asset-referenced tokens may offer them to the public or seek admission to trading.13  Nonetheless, with the issuer's written consent and compliance to specific requirements, persons other than the issuer may also offer these tokens to the public or seek admission to trading.14

What are the formalities for proceeding with the offering?

Before offering asset-referenced tokens to the public or seeking admission to trading, issuers or offerors (if applicable) must prepare a document similar to a prospectus, known as a white paper, with specific content requirements set out in the MiCa Regulation.15

The issuer or the offeror (as the case may be) must submit the white paper to the competent authority as part of the authorisation process16 , or, in the case of an approved credit institution not requiring specific authorisation, under the specific procedure laid down for this purpose17 . For non-credit institution issuers, their white paper is deemed to be approved upon approval of the issuer under the MiCa Regulation.

The MiCa Regulation provides two exemptions from prior authorisation: (i) if the average value of the asset-referenced tokens issued does not exceed EUR 5 million over a 12-month period and the issuer is not linked to a network of other exempt issuers, or (ii) if the asset-referenced tokens are offered exclusively to qualified investors and can only be held by them.

Last but not least, the MiCa Regulation also introduces liability against an issuer of asset-referenced tokens for the information contained in the white paper if such information is found to be incomplete, unfair, unclear, or misleading.18

What are the obligations of issuers of asset-referenced tokens?

In addition to the prudential requirements previously mentioned, issuers of asset-referenced tokens are subject to a number of obligations under the MiCa Regulation. Specifically, issuers must: 

• act with honesty, fairness, and professionalism, ensuring all communications with current and prospective holders of asset-referenced tokens are fair, clear,  and non-misleading;19

• ensure that all marketing communications related to the public offering or admission to trading of asset-referenced tokens are fair, clear, non-misleading, and consistent with the information in the white paper;20

• establish and maintain effective, transparent procedures for the prompt, fair and constituent handling of complaints from token holders;21

• identify, prevent, manage, and disclose conflicts of interest;22

• maintain a well-defined, appropriate, and transparent governance structure;23

• continuously maintain own funds24  and a reserve of assets as required by the MiCa Regulation25 ; and

• draw up and maintain a recovery plan for situations where the issuer fails to meet the requirements applicable to the reserve of assets26 , and a redemption plan to ensure the orderly redemption of each asset-referenced token.27

Offering to the public or admission to trading of e-money tokens

Who can offer e-money tokens?

Unlike asset-referenced tokens, only authorised credit institutions or electronic money institutions are permitted to offer e-money tokens to the public or seek admission to trading within the European Union.28

What are the formalities for proceeding with the offering?

Similar to issuers of asset-referenced tokens, issuers of e-money tokens must draw up, notify, and publish a crypto-asset white paper, with specific content requirements outlined in the MiCa Regulation29 . They are also subject to strict standards for marketing communications.30  Issuers will be equally held liable for any incomplete, unfair, unclear, or misleading information in the white paper.31  Additionally, e-money token issuers must create and maintain redemption and recovery plans, which must be submitted to the competent authority.32

In contrast to issuers of asset-referenced tokens, e-money token issuers are required to (i) keep at least 30% of the funds received from the issuance of e-money tokens in a separate account with a credit institution, and (ii) invest the remaining funds in secure, low-risk assets that qualify as highly liquid financial instruments with minimal market, credit, and concentration risks.33

It is important to note that if certain criteria are met, asset-referenced tokens or e-money tokens may be classified as "significant"34 . In such cases, the European Banking Authority (EBA) will be the competent authority for supervising the issuer, and the issuer will face additional requirements.

Conclusion

Titles III (Asset-Referenced Tokens) and IV (E-Money Tokens) of the MiCa Regulation impose new prudential obligations on issuers and offerors of asset-referenced tokens and e-money tokens who wish to offer them to the public or seek their admission to trading within the European Union.

While the regulatory frameworks for asset-referenced tokens and e-money tokens are broadly similar, the key difference is that only credit institutions or electronic money institutions are authorised to issue e-money tokens.35  Both asset-referenced token holders and e-money token holders retain a right of redemption against the issuer.

This new harmonised European framework is a positive development, providing a structured approach to prudential supervision of issuers of asset-referenced tokens and e-money tokens, and ensuring a high level of protection for retail investors and the integrity of the crypto-asset markets. Issuers in the sector must carefully consider these new obligations to ensure full compliance.

• 1European regulation (EU) 2023/1114 of 31 may 2021 on Markets in Crypto-Asset (“MiCa Regulation”).
• 2Art. 2, §4 and Whereas 3 of the MiCa Regulation.
• 3Art. 3, §1, 5° of the MiCa Regulation.
• 4Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market, and repealing Directive 2003/71/ECText with EEA relevance.
• 5Directive 2013/36/UE of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC.
• 6Art. 16, §1 of the MiCa Regulation.
• 7Art. 18, §5, 21, §2 of the MiCa Regulation. See also the Joint EBA and ESMA guidelines on suitability of management body members and shareholders for entities under MiCa of 27 June 2024.
• 8Art. 34 of the MiCa Regulation.
• 9Art. 35 of the MiCa Regulation.
• 10Art. 36 of the MiCa Regulation.
• 11Art. 16 §3 of the MiCa Regulation.
• 12Art. 17 of the MiCa Regulation.
• 13Art. 16 §1, first indent of the MiCa Regulation.
• 14Art. 16 §1, third indent of the MiCa Regulation.
• 15Art. 19 of the MiCa Regulation.
• 16Art. 18, §2, (k) of the MiCa Regulation.
• 17Art. 17, §1, (a) of the MiCa Regulation.
• 18Art. 26 of the MiCa Regulation.
• 19Art. 27 of the MiCa Regulation.
• 20 Art. 29 of the MiCa Regulation.
• 21Art. 31 of the MiCa Regulation.
• 22Art. 32 of the MiCa Regulation.
• 23Art. 34 of the MiCa Regulation.
• 24Art. 35 of the MiCa Regulation.
• 25Art. 36 of the MiCa Regulation.
• 26Art. 46 of the MiCa Regulation.
• 27Art. 47 of the MiCa Regulation.
• 28Art. 48 of the MiCa Regulation.
• 29Art. 51 of the MiCa Regulation.
• 30Art. 53 of the MiCa Regulation.
• 31Art. 52 of the MiCa Regulation.
• 32Art. 55 of the MiCa Regulation.
• 33Art. 54 of the MiCa Regulation.
• 34Art. 43 and 56 of the MiCa Regulation.
• 35Art. 48 of the MiCa Regulation.