Markets in Crypto-Assets Regulation (MiCAR)

The Markets in Crypto-Assets Regulation (MiCAR) introduces a new regulatory framework for European crypto-assets. MiCAR aims to protect consumers and investors and mitigate risks to financial stability.

Issuers of Asset Reference Tokens (ARTs) and E-Money Tokens (EMTs)

MiCAR will bring issuers of certain types of crypto-assets into the regulatory framework. Specifically, MiCAR will establish new rules for issuers of crypto-assets known as "stablecoins" including Asset-Referenced Tokens (ARTs), E-Money Tokens (EMTs), along with new rules for utility tokens. As defined by MiCAR:

ARTs reference multiple currencies, commodities or other crypto-assets
EMTs reference a single official currency
Utility tokens provide access to a good or service supplied by the issuer of that token.

When MiCAR becomes applicable, issuers of ARTs and EMTs will have the following regulatory obligations:

A requirement to be authorised by the Central Bank and to publish a white paper containing information on the relevant ART/EMT for investors
Conduct and governance requirements around marketing, disclosure of information and dealing with conflicts of interest
Prudential requirements to ensure sufficient liquidity and the ability to meet redemption requests

MiCAR recognises that some ARTs or EMTs may be significant due to their size and other factors and as a result may present an increased risk. Accordingly, the European Banking Authority (EBA) will have supervisory responsibilities for issuers of significant ARTs and EMTs.

Crypto-Asset Service Providers (CASPs)

CASPs shall require authorisation in order to operate within the EU. The types of crypto-asset services and activities covered by MiCAR include:

Providing custody and administration of crypto-assets on behalf of clients
Operation of a trading platform for crypto-assets
Exchange of crypto-assets for funds
Exchange of crypto-assets for other crypto-assets
Execution of orders for crypto-assets on behalf of clients
Placing of crypto-assets
Reception and transmission of orders for crypto-assets on behalf of clients
Providing advice on crypto-assets
Providing portfolio management on crypto-assets
Providing transfer services for crypto-assets on behalf of clients.

At a high level, CASPs authorised under MiCAR will be subject to AML, prudential and conduct requirements.

Market abuse

MiCAR also introduces new rules that prohibit market abuse related to any type of crypto-asset transaction or service, including unlawful disclosure of inside information, insider trading and actions that are likely to lead to disruption or manipulation of crypto-assets.

Finalisation of MiCAR

MiCAR was published in the Official Journal of the European Union on 9 June 2023.

MiCAR will become applicable for issuers of ARTs and issuers of EMTs on 30 June 2024
MiCAR will become applicable for issuers of utility tokens and CASPs on 30 December 2024.

Transitional Period for CASPs:

MiCAR provides for a transitional period of up to 18 months for CASPs that provided their services in accordance with applicable national law prior to 30 December 2024. Article 143(3) outlines that Member States can decide not to exercise the discretion or to reduce its duration where they consider the national regulatory framework is less strict than MiCAR.

Following a public consultation on Member State discretions in MiCAR, the Department of Finance outlined in its feedback statement that the transitional period for VASPs operating in Ireland in accordance with applicable law prior to 30 December 2024, shall be a maximum period of 12 months.

Simplified procedure for applications for CASP authorisation:

MiCAR (article 143(6)) provides for a derogation from the authorisation requirements contained in Articles 62 and 63, which allows Member States to implement a “simplified procedure” for services providers authorised and operating under national law to provide crypto-asset services prior to 30 December 2024.

Following a public consultation and as outlined in its feedback statement, the Department of Finance has decided not to exercise this discretion provided for in Article 143(6). This position reflects the advice of ESMA, and recognises that Ireland’s existing VASP regime under the CJA, as amended, is not comparable to the MiCAR CASP requirements.

Level 2 and Level 3 Text

The European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) continue to develop level 2 and 3 texts which, when finalised, will provide greater granularity on the provisions in MiCAR. These texts are important as they will provide detailed specifications of key obligations for firms, including applicant firms seeking CASP authorisation and detail regarding the supervisory responsibilities of National Competent Authorities (NCAs) etc.

EBA and ESMA have commenced consulting with stakeholders regarding the development of Level 2 and 3 texts.

See further information available on ESMA’s three MiCAR consultation packages and the EBA’s approach to its MiCAR policy mandate.

Firms should regularly monitor EBA and ESMA websites for updates on consultations.

Supervisory convergence in the MiCAR transitionary phase

The EBA also issued a statement, which encourages timely preparatory steps towards the application of MiCAR to ARTs and EMTs. The statement includes guiding principles for firms, which are carrying out or considering carrying out ART/EMT activities in the period prior to 30 June 2024.

ESMA has also published a statement in which it notes that full MiCAR rights and protections will not apply to the provision of crypto-asset services until December 2024. ESMA also encourages preparations for a smooth transition to MiCAR across all EU Member States.

Additionally in a letter addressed to the Economic and Financial Affairs Council (ECOFIN), ESMA Chair, Verena Ross, outlines that coordinated action from EU Member States will be paramount to ensure the smooth, convergent, and effective application of MiCAR.

Firstly, ESMA note that NCAs will need to establish as early as they can, supervisory procedures related to the authorisation regime set out in MiCAR. Secondly, ESMA expressed concern that extensive use of the transitional period for entities already providing crypto-asset services in the European Union would weaken the effectiveness of the MiCAR rulebook and so ESMA invited Member States to consider reducing the transitional period for entities that are already providing crypto-asset services from eighteen to twelve months.

Central Bank’s preparation

The Central Bank will be designated as the NCA for the authorisation and supervision of entities that will be subject to MiCAR.

The Central Bank encourages firms that may provide services or products under MiCAR to engage with the Central Bank.

The Central Bank has commenced its preparation for the implementation of MiCAR and has established a cross-sectoral team to integrate MiCAR into the Central Bank’s supervisory and authorisation processes and methodologies. The Central Bank will issue further communications regarding the authorisation and notification processes in due course. Additionally, the Central Bank will continue to monitor developments related to crypto- assets in order to assess any risks to consumer protection and financial stability.

Consumer information related to crypto assets is available on our consumer hub.