Regulation (EU) 2023/1114 of 31 May 2023 on Markets in Crypto-assets (“MiCA” or the “Regulation“) was published in the Official Journal of the European Union on 30 June 2023. The majority of MiCA shall apply from 30 December 2024, but certain provisions have been given an earlier application date. The Regulation is expected to be included into the EEA agreement and implemented into Norwegian law.

The Norwegian Ministry of Finance assigned the task of assessing the Norwegian implementation of MiCA to the Norwegian Financial Supervisory Authority, setting a deadline of 1 March 2024.

Background and purpose

MiCA introduces a harmonized framework for Markets in Crypto-assets. The Crypto-asset space has been subject to regulatory fragmentation, which could distort competition, make it difficult for actors in the Crypto-asset space to scale up their business with cross border activities and give rise to regulatory arbitrage. The aim of the harmonization is to create uniform rules, which provide clarity and limits the regulatory fragmentation and its negative effects. The Regulation also aims at increasing user confidence which could foster development of innovative digital services, alternative payment instruments and new funding sources for companies.

Crypto-assets within the scope of MiCA

The Regulation defines Crypto-assets as a “digital representation of a value or a right which can be transferred and stored electronically using DLT or similar technology”. Crypto-assets are further categorized into three types:

E-money tokens (EMTs): Crypto-assets designed to maintain a stable value by referencing the value of one official currency (e.g. Crypto-assets backed by USD).
Asset-referenced tokens (ARTs): Crypto-assets designed to maintain a stable value by referencing another value or right, or a combination of the two (e.g. Crypto-assets backed by several official currencies, Crypto-assets backed by commodities or Crypto-assets backed by a basket of assets).
Crypto-assets other than EMTs and ARTs

The definitions of EMTs and ARTs apply irrespective of how the mechanism to maintain a stable value of the Crypto-asset is designed. Algorithmic stablecoins that utilize algorithms to maintain price stability by regulating the supply will therefore be covered by the scope of the Regulation. Algorithmic stablecoins are effectively not permissible under MiCA as they will have to comply with reserve of assets requirements.

Crypto-assets excluded from the scope of MiCA

The Regulation excludes certain Crypto-assets from its scope. One such category is Crypto-assets within the scope of other legislative acts, such as Crypto-assets qualifying as financial instruments under MiFID. The Regulation also excludes certain intragroup transactions, digital assets issued by central banks and digital assets which cannot be transferred.

Moreover, unique and non-fungible Crypto-assets, commonly known as Non-Fungible Tokens (“NFTs“), are not covered by the Regulation. However, the regulator shall take a de facto approach to consider which Crypto-assets are unique or non-fungible. Fractional parts of unique and non-fungible assets are not considered unique and non-fungible.

Requirements for issuers of Crypto-assets

MiCA establishes requirements for issuers of Crypto-assets, with the specific requirements varying based on the type of Crypto-asset issued. The issuer of a Crypto-asset may not necessarily be its creator but could be an entity that offers it to the public or seeks its admission to trading on a platform.

Requirements for issuers of stablecoins (EMTs and ARTs) are more extensive than for other Crypto-assets.

Crypto-asset service providers

MiCA requires that entities performing Crypto-asset services are authorized as Crypto-asset service providers (“CASPs“). Additionally, entities authorized as credit institutions, central securities depositaries, investment firms, market operators, electronic money institutions, UCITS management companies or AIFMs are allowed to provide all or certain Crypto-asset services.

The requirements outlined in MiCA vary based on the specific activities conducted by the CASP. The Regulation establishes a series of requirements applicable to all CASPs, along with additional, specific requirements for CASPs who offer certain services.

Cross-border activities and reverse solicitation

The Regulation also allows for CASPs authorized in the Union to offer Crypto-asset services on a cross-border basis provided a notification is sent to the competent authority in the home member state. Third-country firms wanting to provide Crypto-asset services within the Union will have to provide services on the initiative of the client (reverse solicitation). The activities are not provided on a reverse solicitation basis if the entity promotes or advertises the services within the Union.

Conclusion

MiCA will provide more clarity for entities in the Crypto-asset space, which will likely be beneficial compared to the fragmented state of Crypto-asset Regulation today. MiCA has adopted certain similarities with other EU legislative acts, such as the investment services and activities in MiFID, which may make the transition to the new framework on Crypto-assets less complex. The Regulation is currently being assessed for implementation in Norway, and the Norwegian Ministry of Finance has stated that it will work towards implementation without significant delays compared to the EU.

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