Last week, the European Union took an important step towards regulating the fast-growing cryptocurrency market by finalizing the Regulation on Markets in Cryptocurrency Assets (the “MiCA Regulation”). The new regulation was approved by the European Parliament on 20 April 2023 and is now subject to formal approval by the European Council and publication in the Official Journal of the European Union.

Regulation of MiCA. Object and field of application

MiCA is an EU regulation that regulates the issuance and provision of services related to cryptoassets and stablecoins. It is one of the most anticipated pieces of EU legislation in recent years and represents the first and only legal framework of its kind in the world, paving the way for other jurisdictions to follow suit. The MiCA Regulation will enter into force within 18 months of its entry into force, with the exception of the provisions relating to tokens equivalent to electronic currencies and tokens linked to assets, which will enter into force on the date of entry into force of the regulation. Therefore, we expect that in late 2024, early 2025 we will have a fully applicable legal framework for cryptoassets in EU member states.

The MiCA Regulation establishes new general rules for the issuance, supervision, consumer protection and environmental protection of cryptocurrencies (including cryptocurrencies). It includes safeguards against market manipulation and financial crimes, such as mandatory reporting of suspicious transactions, and requires stablecoin issuers to maintain a reserve of assets to guarantee the value of the tokens. According to the proposed MiCA Regulation, a cryptoasset is defined as “a digital representation of value or rights that can be transferred and stored electronically using distributed ledger technology or similar technology”. The regulation distinguishes between several types of cryptoassets and sets specific requirements for issuers of cryptoassets and service providers in the field of cryptocurrencies, similar to those previously established for other financial services (for example, payment service providers and issuers of electronic currencies).

Although the MiCA Regulation is a significant step forward in the field of cryptoassets, it leaves out several components of the field of digital financial assets. The MiCA Regulation does not regulate the decentralized finance industry, non-fungible tokens (NFTs) and financial transactions through crypto-assets. All these variables will require further analysis and a new legislative framework in the future.

Impact on the Romanian market

The adoption of the MiCA Regulation is expected to have a significant impact on financial regulation in Romania. For example, it will require Romanian companies trading in cryptoassets to register with the relevant authorities and implement anti-money laundering and anti-terrorist financing measures against their clients. In addition, Romanian legislation will need to be adjusted and adapted to the new regulations, in particular in terms of legislation on the protection of the rights of consumers and issuers of electronic money, which partially overlap with the MiCA Regulation.

Regulations on the transfer of funds

At the same time, it should be noted that the MiCA Regulation is not the only significant step towards the regulation of the cryptocurrency market in the European Union. On the same day, the European Parliament also approved the Regulation on information accompanying transfers of funds and certain crypto-assets. This regulation aims to prevent the use of crypto-assets for money laundering or terrorist financing by requiring detailed sender and receiver information to accompany transfers of such assets. This information will be available to financial intelligence units and law enforcement agencies, helping to identify and investigate suspicious transactions.

The approval of the MiCA Regulation together with the funds transfer regulation marks an important stage in the regulation of the crypto-assets market in the European Union and, in particular, cryptocurrencies. Although there are still some steps to be taken before coming into force, the regulations are expected to provide greater transparency, stability and protection for investors and consumers of cryptoassets, while providing safeguards against financial crimes and market manipulation.

The article was signed by Rebecca Marina (senior lawyer) and Marius Geldiu (lawyer)