MARKETS IN CRYPTO-ASSETS REGULATION
The Markets in Crypto Assets Regulation (MiCA) regulates the issuance of crypto-assets and the crypto-assets service providers. EUCI has been involved in the MiCA regulatory process for more than two years – from the moment the first draft was issued by the European Commission.
It presents one of the most important legal frameworks as it excludes Non-Fungible Tokens and fully decentralised use cases, while it provides the legal definition for a new group of assets, i.e. the Crypto Assets which contain the following subcategories: (i) Crypto Assets, (ii) Utility tokens, (iii) E-money tokens, and (iv) Assets Referenced tokens.
With a detailed regulation of stablecoins, E-money tokens and Asset References tokens, MiCA fulfils its objective of protecting European financial stability. Primarily taking into account consumer protection, regulation of Services related to Crypto Assets is a major part of MICA. Custodial services, the exchange of crypto assets and the provision of licenses are now homogeneously regulated all over the EU market.
While this regulatory process started almost four years ago, it’s finally coming to a completion. On April 20, 2023, the European Parliament had a final vote on MiCA. The final text will be published in the official journal of the European Union in June. The part referring to the stablecoins will become applicable 12 months after its publication, while the rest of MiCA will become fully applicable 18 months after its publication.
EUCI was created as a reaction to the first draft of MiCA being published by the European Commission in 2020. Over the last years, we have sent multiple position papers, attended meetings with the regulators and organised workshops. Our members believe EUCI has contributed significantly to the facilitation of the dialogues between regulators and the crypto industry. We will continue to help bring clarity towards the interpretation and application of the MiCA final text and Guidance and Regulatory Technical Standards developed under ESMA and EBA.
ANTI MONEY LAUNDERING REGULATION
The Anti Money Laundering package is an important project presented at the beginning of the current European Commission’s mandate. The AML/CTF package consists of four documents:
- The update of the Transfer of Funds Regulation
- Anti-Money Laundering Regulation
- The update of Anti Money Laundering Directive
- Anti-Money Laundering Agency
Transfer of Funds Regulation
The Transfer of Funds Regulation was updated to cover crypto-asset transactions, reporting and record-keeping for such transactions. The current updated version of TFR extends the scope to the existing wire transfer services providers’ requirements to include the information on the payer and the payee. Based on the updated recommendation of the Financial Action Task Force (FATF), TFR now also covers the transfer of virtual assets.
Crypto assets service providers (CASPs), including crypto exchanges and custodian wallet providers will have to implement measures to prevent and detect the misuse of crypto-assets for money laundering and terrorist financing. This includes conducting risk assessments, monitoring transactions, and maintaining accurate information on originators and beneficiaries. CASPs must also report any suspicious transactions to the relevant authorities. The TRF does not apply to transactions referred to as peer-to-peer transactions.
The Anti Money Laundering Regulation emphasises risk-based approaches to AML compliance. Financial institutions (alongside the crypto-assets service providers) are required to conduct regular risk assessments to identify and assess the risks of money laundering and terrorist financing associated with their customers, products, services, and geographical locations. The AMLR is not finalised or applicable yet. According to the EU regulatory process there are currently three AMLR drafts coming from each EU institution involved in the process: the European Commission, the European Parliament and the Council. EUCI has been involved in the dialogue with those institutions and will continue with the involvement during the trialogues. The main principles EUCI is advocating for during the AMLR negotiations specific to regulating crypto-assets is the alignment with other EU laws, like TRF and the same standards as the ones that apply to the traditional payment system. Due to the specifics of blockchain technology (e.g. the immutability and the transparency), we are especially attentive to financial privacy.
OTHER CRYPTO-ASSET REGULATION
Apart from the more widely known MiCA, TFR and the AML Regulation, a significant number of other EU regulations will impact the crypto industry. Examples include the upcoming Data Act, the Capital Requirements Regulation (CRR), the Credit Requirements Directive (CRD), the update of the Product Liability Directive and the Cyber Resilience Act.