European Parliament approves bill for comprehensive regulation of crypto industry "Crypto Asset Markets" (MiCA) on 20 April 2023 and was approved by the EU Council on 16 May. The main provisions of the new law on stablecoins entered into force one year after its adoption, and now the rest have entered into force.
MiCA establishes a unified approach to the regulation of digital assets, aimed at protecting investors and consumers in the 27 EU countries, as well as ensuring transparency and stability in the crypto industry. MiCA includes rules affecting issuers of fiat digital assets and stablecoins, as well as trading and custody platforms.
The new rules require proper disclosure, compliance with AML/CFT standards and provide specific requirements for stablecoins, which must be backed by a separate pool of assets.
The following classification of tokens is presented within MiCA:
1. ancillary tokens - cryptoassets designed to provide access to the issuer's goods and services
2. reference assets - cryptoassets that provide a stable price based on the value of several fiat currencies, commodities, cryptoassets or a combination thereof
3. e-money - cryptoassets used as a means of exchange and maintaining a stable price tied to the value of fiat currency, which is legal tender.
Issuers of the above asset types are required to provide a detailed white paper to the competent authority in the EU.
MiCA in the EU also regulates Crypto Asset Service Providers (CASPs). Specifically, these are companies and platforms offering the following services:
- storage and administration of crypto assets, execution of orders for them on behalf of third parties
- operation of a crypto asset trading platform
- exchange cryptoassets for fiat currency that is legal tender or for other digital assets
- placement of cryptoassets and provision of advice on them.
CASPs are required to have a registered office in one of the EU countries, obtain authorisation as a service provider and also comply with organisational and reputation requirements and crypto asset custody regulations. As part of the fight against money laundering, CASPs must verify the identity of their clients. The European Securities and Markets Authority (ESMA) will monitor the activities of the largest crypto asset service providers.
Issuers of stablecoins are required to obtain a licence from a competent authority, register with the European Banking Authority (EBA), comply with rules to ensure the stability of their tokens and maintain sufficient reserves. In particular, MiCA obliges issuers of stablecoins to hold 30-60% of their reserves in European banks.
They must also provide full customer disclosure, a public business model and an effective governance framework, including risk management. It is worth noting that Circle, the issuer of USDC and EURC, has already confirmed full compliance with MiCA.
By December 30, 2024, crypto exchanges in the EU had to remove the USDT stablecoin issued by Tether. On December 13, the Coinbase exchange already removed the USDT, PAX, PYUSD, GUSD, GYEN and DAI stablecoins.
From 30 December, EU crypto exchanges will also require additional identity verification of their customers for transactions over €1,000.