On 24 September 2020, the European Commission (EC) published a proposal on the regulation on crypto-assets or MiCA (Regulation on Markets in Crypto Assets), in December 2021, the European Union (EU) Council adopted a compromise text on the Regulation. The text of the final proposal to be directed for final approval by the European Parliament and the EU Council should now be agreed at the trialogue meetings of the EC, the European Parliament and the EU Council. Once the proposal is adopted, it will be published in the Official Journal of the EU and enter into force within the time limit specified in the legislation.
Following the entry into force of the MiCA framework in Latvia, depending on the classification of crypto-assets, two-way regulation will be applied, namely the new MiCA framework and existing legislation at EU level (e.g., MiFIDII and PSD2) and at Latvian level (e.g., Financial Instrument Market Law).
The aim of the MiCA framework is to create a completely new and unitary crypto-asset regulatory regime in all EU Member States, to promote innovation development and wider use of DLT while maintaining financial stability and protecting investors against risks.
The implementation of these MiCA objectives will allow, in a safe regulated environment, for the development and expansion of the number of companies working in the fast-growing crypto-asset sector in Latvia.
MiCA is part of the EC digital finance strategy, which aims to support the development of digital finance while mitigating the associated risks.
The MiCA regulation will apply to legal and natural persons and businesses involved in crypto-asset issuance, offers to the public, admission to trading or providing services related to crypto-assets in the EU, and any transactions or activities related to crypto-assets.
The MiCA regulation applies to all types of crypto-assets which are not covered by any of the existing EU national legislation governing financial services, including: asset-referenced tokens, e-money tokens and other crypto-assets other than asset-referenced or e-money tokens.
This type of crypto-assets that is not an e- money token and that purpose is to maintain a stable value by referencing to any other value or rights or combination thereof, including one or several official currencies.
An example of this type of crypto-asset is a relatively new type of crypto-assets, stablecoins. They may be pegged to a specific currency (such as the US dollar, the euro) or a basket of currencies, or to other types of crypto-assets or their basket, with a view to reducing price volatility.
This is a type of crypto-asset that purports to maintain a stable value by referencing to the value of an official currency of one country and, like electronic money, is used for settlement or for the purpose of maintaining a stable value.
This crypto-asset group covers a wide range of crypto-assets, including utility tokens, which provide digital access to a good or a service supplied by the issuer of this token.
The MiCA Regulation does not apply to crypto-assets that are unique and non-fungible by other crypto-assets, as well as crypto-assets classified as:
- financial instruments governed by Directive No 2014/65/ES on financial instruments markets (MiFID II);
- deposits, including structured deposits;
- funds not classified as e-money tokens governed by Directive (EU) No 2015/2366 on payment services in the internal market (PSD2);
- others (e.g., life and non-life insurance products, pension products).
The MiCA Regulation does not apply to the European Central Bank, EU national banks.
The MiCA Regulation will provide legal clarity and certainty for crypto-asset issuers and crypto-asset service providers, by defining:
- transparency and disclosure requirements for crypto-asset issuance, offers to the public and admission to trading (admission to trading);
- the procedures for the authorisation of crypto-asset issuers and service providers and their subsequent monitoring;
- the activities, organisation and management requirements of crypto-asset issuers and service providers.
The MiCA Regulation will allow passporting operators authorised in one EU Member State to provide their passporting services in all EU countries.
The MiCA Regulation covers certain requirements and measures that will provide protection for crypto-asset holders and clients of service providers (capital requirements, asset storage, mandatory complaint storage procedures available to investors and investor rights against the issuer).