EU Legal Framework for Markets in Crypto-assets & Introducing Stablecoins. What’s next?
The European Commission has recently issued a draft proposal [https://ec.europa.eu/finance/docs/law/200924-crypto-assets-proposal_en.pdf] for a potential and upcoming Regulation of the European Parliament and of the Council on Markets in crypto-assets (MiCA) with the purpose of creating a legal framework within the European Union in its effort to assert certainty by establishing uniform rules on crypto-assets service providers and issuers on EU level currently not covered under existing financial services legislation. The goal would be to surpass numerous challenges encountered by investors and Service Providers on a transnational level that may be limited by limitations presented by different requirements for transparency and disclosure in relation to issuance and offering purposes imposed on crypto-assets by domestic legislation by each Member State.
The proposed Regulation is divided in seven titles. Among the provisions which set up the subject matter, it is worth mentioning that crypto issuers may proceed with offerings or have crypto-assets admitted to trading only if they provide a whitepaper authorized by the competent authorizes. Its disclosure to the public will not be necessary for SMEs for cost saving purposes under certain capital requirements. The whitepaper deals with capital and governance requirements, rules on conflicts of interest, rules on the stabilization mechanism and the reserve of assets backing the asset-referenced tokens and requirements for the custody of the reserve assets for issuers when seeking approval to set up trading platforms for crypto-assets. In turn, the competent authorities of the Member State regulating the legal entity will decide whether the crypto asset qualifies as a financial instrument under MiFID II or as electronic money under Directive 2009/110/EU.
Moreover, holders of e-money tokens (often called stablecoins) shall be authorised by an E-Money Institution and will be provided with a claim on the issuer: stablecoins shall be issued at par value on receipt of funds and upon request of the holder of e-money tokens, the issuer must redeem them at any moment at par value. The provisions of authorization and operating conditions regulating the trading platform that will be providing services related to custody of crypto-assets, exchange of crypto to fiat currency or other crypto-assets, execution of orders, placement of crypto-assets, reception and transmission of orders are also covered under Title V.
The proposal targets to set in general a robust legal framework and co-ordinate the national authorities with ESMA and EBA to safely supervise and regulate the issuing and offering of crypto-assets while minimizing their value volatility and money-laundering discrepancies that are currently connected with the use of crypto-assets. In an era where digitization of payments becomes essential for speedy transactions it is evident that crypto-assets cannot be left unregulated as they form an alternative means of payment and with the backing up by reserve assets they could become a credible means of exchange and store of value while maintaining consumer protection.