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The Path to the EU Regulation Markets in Crypto-assets (MiCA)

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  • Read, Oliver
  • Diefenbach, Carolin

Abstract

This paper provides background to the upcoming EU regulation on Markets in Crypto-Assets (MiCA). The first step to regulate crypto-assets at EU level was taken by including virtual currencies in the revision of the Anti-Money Laundering Directive (5AMLD) which came into force 2018. Initial coin offerings fueled growth to a market with a variety of crypto-assets (payment, investment/security, utility and hybrid tokens). In principle, MiFID II should cover investment/security tokens by treating these as financial instruments. In January 2019, EBA and ESMA identified regulatory gaps at EU level. The announcement on the stablecoin project Libra in June 2019 sent shockwaves and led to defensive reaction against global stablecoins by regulators in light of significant risks and challenges posed. The EU institutions adopted strict positions against global stablecoins taken by the G7 and the G20. In September 2020, the European Commission launched the MiCA draft legislation to plug regulatory gaps concerning payment (including stablecoins) and utility tokens. Issuers, offerors and service providers of crypto-assets that are not financial instruments would be regulated under MiCA at EU level. Stricter rules should apply for stablecoins. After negotiations between the EU institutions, the final agreed MiCA text will go to plenary vote soon. The EU regulation will come into force in the EU member states in 2024. Many additional areas of action (Decentralized Finance, non-fungible tokens, EU taxonomy for sustainable activities) had to be left out from the MiCA scope for the sake of finalising the legislation.

Suggested Citation

  • Read, Oliver & Diefenbach, Carolin, 2022. "The Path to the EU Regulation Markets in Crypto-assets (MiCA)," wifin Working Paper Series 13/2022, RheinMain University of Applied Sciences, Wiesbaden Institute of Finance and Insurance (wifin).
    • Handle: RePEc:zbw:wifinw:132022
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    File URL: https://www.econstor.eu/bitstream/10419/266233/1/wifin-wp13.pdf
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    References listed on IDEAS

    as
    1. Bullmann, Dirk & Klemm, Jonas & Pinna, Andrea, 2019. "In search for stability in crypto-assets: are stablecoins the solution?," Occasional Paper Series 230, European Central Bank.
    2. Oliver Read & Stefan Schäfer, 2020. "Libra Project: Regulators Act on Global Stablecoins," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 55(6), pages 392-398, November.
    3. Force, ECB Crypto Assets Task, 2020. "Stablecoins: Implications for monetary policy, financial stability, market infrastructure and payments, and banking supervision in the euro area," Occasional Paper Series 247, European Central Bank.
    4. Gschossmann, Isabella & van der Kraaij, Anton & Benoit, Pierre-Loïc & Rocher., Emmanuel, 2022. "Mining the environment – is climate risk priced into crypto-assets?," Macroprudential Bulletin, European Central Bank, vol. 18.
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    6. Adachi, Mitsutoshi & Cominetta, Matteo & Kaufmann, Christoph & van der Kraaij, Anton, 2020. "A regulatory and financial stability perspective on global stablecoins," Macroprudential Bulletin, European Central Bank, vol. 10.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Bitcoin; crypto-assets; crypto-asset service providers; cryptocurrencies; distributed ledger technology (DLT); Diem; electronic money; initial coin offering (ICO); Libra; Meta; Markets in Cryptoassets (MiCA); non-fungible token (NFT); payment tokens; security tokens; stablecoins; TerraUSD; Transfer of Funds Regulation (ToFR); utility tokens;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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