Roadmap for Regulation (EU) 2023/1114 (MiCA): Initial steps

What is MiCA?

Regulation (EU) 2023/1114 of the European Parliament and of the Council (“MiCA”), approved on May 31, 2023, is a European Union (“EU”) law regulating crypto-asset markets. It aims to establish a unified regulatory framework across Europe for issuing, offering to the public, and admitting to trading crypto-assets, as well as providing services related to them. Crypto-assets are defined as digital representations of values or rights, transferrable and storable electronically using distributed ledger technology (i.e., blockchain) or similar.

Crypto-assets are categorized into three types:

• Electronic money (e-money) tokens: Crypto-assets that aim to maintain a stable value by referencing the value of one official currency.
• Asset-referenced tokens: Crypto-assets that are not e-money tokens and that aim to maintain a stable value by referencing another value or right, or a combination of both, including one or more official currencies.
• Crypto-assets that are neither e-money nor asset-referenced crypto tokens, including utility tokens intended exclusively to provide access to a good or service provided by its issuer.

In terms of the registration of entities that provide crypto-asset services, the MiCA replaces the regime established in Law 83/2017 of August 18, which required these entities to register with the Bank of Portugal for the purposes of anti-money laundering and countering the financing of terrorism.

What are its main measures?

Main measures introduced by MiCA:

Transparency and disclosure requirements for issuing, offering to the public and admitting crypto-assets to trading on a trading platform for crypto-assets.

• Requirements for authorizing and supervising crypto-asset service providers, issuers of asset-referenced tokens, and issuers of e-money tokens, as well as for operating, organizing and governing them.
• Requirements for protecting crypto-asset holders in the issuance, offer to the public, and admission to trading of crypto-assets.
• Requirements for protecting crypto-asset service providers’ clients.
• Measures to prevent insider trading, unlawful disclosure of inside information, and market manipulation related to crypto-assets.

Who does it apply to?

The MiCA applies to various participants in the crypto-asset markets, from the time they are issued to the moment they are placed with investors:

• Issuers: Natural or legal persons, companies or other undertakings that issue crypto-assets
• Offerors: Natural or legal persons, companies or other undertakings that offer crypto-assets to the public
• Service providers: Legal persons or undertakings that provide one or more professional crypto-asset services

The MiCA does not apply to:

• Services provided exclusively within the same group;
• The European Central Bank, the European Investment Bank, or central banks;
• Crypto-assets that are unique and not fungible with other crypto-assets;
• Crypto-assets classified as financial instruments or other financial products covered by specific regulations; and
• Certain international and EU public entities.

When does it apply?

The MiCA becomes effective in two stages. Although it entered into force on June 29, 2023, market participants have a period to adapt to the new rules:

• Rules for e-money tokens and asset-referenced crypto tokens have applied since June 30, 2024.
• Remaining rules will start applying from December 30, 2024.

However, there are certain exceptions and transitional measures:

• Rules on public offerings do not apply to offers to the public of crypto-assets ending before December 30, 2024.
• Crypto-asset service providers that provide their services in accordance with applicable law before December 30, 2024, may continue to do so until July 1, 2026, or until they receive or are denied authorization under the MiCA, unless the home Member State reduces the duration or decides not to apply the transitional regime, whichever is earlier.

Next steps

One of  MiCA’s key features is its transitional regime, allowing entities already providing crypto-asset services under the applicable law to continue operating under certain conditions after MiCA becomes applicable.

However, Member States have the discretion to opt out of this transitional period or shorten its duration if they consider their existing national regulatory frameworks less stringent than MiCA requirements. For example, Spain has predictably established a transitional period of 12 months, ending on December 30, 2025.

Also, although the EU supervisory authorities (the European Banking Authority and the European Securities and Markets Authority) are responsible for preparing reports, guidelines, and technical regulatory standards, and the European Commission for adopting delegated acts, each Member State must determine the competent authority and the necessary procedures to enforce MiCA through their national implementing laws.

Despite the importance of national laws and regulations in this sector, Portugal has not yet passed legislation to determine the competent authority/ies under Article 93 of the MiCA. Doing so would provide target entities with a greater understanding of how to comply with their current obligations (for e-money and asset-referenced tokens) or future obligations (for crypto-asset service providers).

We will continue to monitor the next steps in implementing the MiCA across Europe, with a focus on Portugal.