MiCA: Agreement made on Thursday following final trilogue

In the discussion of NCAs vs ESAs, it was decided that cryptoasset service providers (CASP) will be supervised at an NCA level. However, European Securities and Markets Authority (ESMA) will have a roll in coordinating the largest caps with 15 million customers or more. That being said, ESMA and the European Banking Authority (EBA) will have the power to intervene if there is a threat to market integrity, consumer protection or financial stability. The EBA will also be the supervisor for significant stablecoins, whilst ESMA will hold a register.

On stablecoin issuers, issuers will need to obtain prior approval before being able to issue their stablecoin and will have to have 1:1 backing to ensure it can meet any demands. It will also be restricted from being too large with arrangements in place to prevent it crossing €200m in transactions per day.

On CASPs, there are a number of requirements put in place in essence to for a fit and proper test as well as ensuring the right systems and controls are in place to protect the consumer. There is also a link in with the transfer of funds rule which was agreed on Wednesday to ensure that the requisite AML rules are in place.

Decentralized Finance (DeFi) has been excluded from the scope of MiCA but new proposals will be expected on this within 18 months of entry into force.

On energy consumption, ESMA will develop the Regulatory Technical Standards (RTS) to determine how issuers are to report the environmental impact of their consensus mechanisms and exchanges of their activities.

Non-fungible tokens (NFT) are excluded from the scope of this proposal unless they have fractionalized ownership. However it is said that this will be assessed on a case-by-case basis. In any case, the commission will come up with a new regime within 18 months.

Transfer of Funds Regulation (TFR):

The agreement sees that there is no de minimus in place for transactions. This means that every cryptoasset transaction will require beneficiary and originator information – going beyond the Financial Action Task Force’s (FATF) guidance.

The concern of banning unhosted wallets has been avoided. Instead any transaction over €1000 will require verification that it is a wallet controlled by their own customer and then apply a risk based approach for transactions. The treatment of unhosted wallets will be reviewed in 18 months.

CASPs will have to conduct diligence when dealing with non-eu CASPs. A list of non-complaint CASPs will be published which EU CASPs must not interact with.