EU's MiCA Regulation Is Live –– What Is Next?

Regulation is taking hold across the globe - what does that mean for Europe?

The European Union’s Markets in Crypto Assets (MiCA) regulation came into effect at the end of 2024. Now, member states of the EU have to enforce the MiCA regulation on their Crypto Asset Service Providers (CASPs) and ensure they meet requirements related to consumer protection, market abuse detection, and adherence to industrial standards.

While MiCA aims to be a uniform regulatory framework for the crypto industry in the European Union, member states have been introducing their standalone rules for the four years that MiCA has been making.

Now, it begs the question, what next?

What Next?

The EU has put in the question of how member states will adapt new crypto regulations and transition from the old ones into consideration. To assist in the implementation of the regulation consistently across the bloc, relevant EU bodies have been publishing guidance to clarify certain MiCA provisions.

On December 17, the European Securities and Markets Authority (ESMA) published a final report clarifying conditions for classifying crypto assets. The ESMA guidelines are designed to assist member states in evaluation of CASPs to see if they meet the criteria that trigger given financial disclosures and obligations.

Key MiCA Provisions

The MiCA regulation is doubling down on new disclosure requirements. One of the main requirements is before introducing a new asset, issuers have to draft a well-detailed whitepaper that contains correct and key details like tokenomics, risks, and the consensus mechanism in use.

The whitepaper then has to be submitted to a national authority that reserves the right to approve or disapprove the launch of the token in question. At the same time, the issuer is required to comply with marketing disclosure.

The requirements for stablecoin issuers, however, go beyond the disclosure obligations. They have to obtain electronic money institution EMI licenses, which impose significant Anti-Money Laundering (AML), Know-Your-Customer KYC, and audit obligations. Owing to the recent drawbacks with algorithmic stablecoins, the MiCA regulation outlaws them. It is also imposing high stablecoin requirements regarding liquidity, redemption and winding down procedures.

One of the major highlights is that MiCA is placing a de facto ban on privacy coins. It is also pushing for tougher and more strict oversight of CASPs, including custody policies for safe funds custody, implementation of a robust market detection and reposting system, and robust AML and KYC systems.

How Will Companies Adapt?

Several companies have been largely affected by the new regulation. Some big names like Tether are yet to be on the safe side since stablecoins are a key focus area. However, the regulation grants crypto companies a grace period to apply for the right licenses and start using them.

Stablecoin issuers have been given a 12-month window from the law’s implementation to get licenses. For CASPs, the window is set at 18 months, giving them until June 2026 to obtain licensing or cease operations in the EU. Stay close for more updates.