The European Markets in Crypto-Assets Regulation

With its 2020 digital finance package, the European Commission has set new priorities for Europe as a financial marketplace:

a) Strategy for digital finance,

b) Strategy for retail payments and

c) legislative proposals on crypto assets and the stability of digital systems.

The Markets in Crypto-Assets Regulation (MiCAR) was launched with the declared aim of strengthening Europe's competitiveness and innovative strength, while at the same time maintaining consumer protection and financial stability.

With the MiCAR, the European Union is positioning itself for the first time in the future market for crypto assets and creating standardised rules for all market players. MiCAR creates various types of digital representations of values or rights that can be transferred and stored electronically using distributed ledger technology (DLT). The asset-referenced tokens (ART), e-money tokens (EMT) or other crypto assets such as utility tokens can be traded on blockchain-based marketplaces. The crypto-asset whitepapers of the regulated crypto-assets required for regulatory purposes inform interested parties and owners of the crypto-assets about the issuer and the project, among other things.

MiCAR regulates both the issuers and the crypto-asset service providers (CASP), which enable the trading of tokens for euros or custody, for example. MiCAR thus creates a secure legal framework for the issuance, purchase and sale, trading and custody of crypto assets that are not MiFID financial instruments. Issuers of crypto assets and CASPs become financial service providers through MiCAR. The requirements of MiCAR are to be distinguished from existing European directives and regulations as well as national legislation.

The MiCAR creates a Europe-wide authorisation system and gives players in the crypto universe Europe-wide legal certainty for the first time. All market players based in an EU member state have the opportunity to obtain a MiCAR licence. The passporting that is possible with the licence enables the Europe-wide distribution of the issued crypto assets and the Europe-wide expansion of business activities. However, the advantages of the licence for market players are associated with compliance with transparency and disclosure obligations as well as obligations to protect consumers and prevent market abuse.

MiCAR also poses extensive challenges for institutions that already have a national licence under the KWG. They must undergo corresponding notification procedures and fulfil specific requirements of MiCAR (and more specific RTS), for example with regard to business continuity management. MiCAR therefore also requires BaFin to further develop its administrative practice. Institutions should seek dialogue with the supervisory authorities on this at an early stage.

MiCAR has been in force for stablecoins and value-referenced tokens since 30 June 2024.

For all other areas of application (in particular the regulation of CASP), it will come into force on 30 December 2024.

MiCAR is much more than just the EU-wide regulation of business models and services that are already possible in principle at national level in Germany. MiCAR creates a single European market for crypto-asset services with 448 million citizens. MiCAR thus opens up the largest addressable market for crypto assets and related services. The EU will therefore offer the most attractive and relevant market for crypto assets worldwide for regulated institutions and actors. Competition for the issuance of crypto assets and for crypto asset services within the EU and thus also within Germany is thus gaining momentum.

It will also be interesting to see whether the MiCAR will be used primarily for stablecoins and the EU-wide provision of crypto services or also for the issuance of new crypto assets such as asset-referenced tokens or e-money tokens.

We support you in the customised implementation of the new regulatory requirements. We contribute our experience from established credit and financial services institutions as well as our expertise on the special features of market participants in the crypto universe.