Regulation (EU) 2023/1114 on markets in crypto-assets: a comprehensive study

For several years now, the European Union (EU) has been at the heart of a regulatory harmonization dynamic, with the major goal of ensuring financial stability, protecting consumers, and fostering innovation within the single market. The emerging sector of crypto-assets (or “digital assets”) perfectly illustrates the need for supervision: while it is a source of innovations and economic opportunities, it also presents a series of significant risks (money laundering, terrorist financing, cyberattacks, volatility, etc.). In this context, on January 1, 2025, Regulation (EU) 2023/1114 on Markets in Crypto-Assets, known as “MiCA,” will come into force, and is expected to respond — at least in part — to these challenges.

Part 1: The Legal and Political Context Surrounding the Adoption of the MiCA Regulation on Crypto-Assets

§1. General Introduction

Facing the massive rise of the crypto-asset ecosystem — whether cryptocurrencies (Bitcoin, Ether…), stablecoins (tokens pegged to fiat currencies or other assets), or the growing tokenization of various assets — it became necessary to clarify the legal framework for all stakeholders. It is in this context that the proposal for a regulation entitled “Regulation on Markets in Crypto-Assets” (MiCA) emerged, whose official name in French is “Règlement du Parlement européen et du Conseil sur les marchés de crypto-actifs.”

Published in the Official Journal of the European Union in June 2023, this regulation aims to establish a unified set of rules applicable to crypto-asset issuers, crypto-asset service providers, as well as to certain market behaviors (prohibition of market abuse, requirement for information disclosure, etc.). The first part of this very detailed article aims to provide a comprehensive overview of the historical, legal, economic, and political background that motivated the drafting and adoption of MiCA.

We will notably examine:

• How the growth of crypto-assets gradually caught the attention of European institutions and national authorities;

• What the main identified risks are and the gaps in existing frameworks;

• How MiCA fits into a broader international regulatory trend, in light of the work of organizations such as the Financial Action Task Force (FATF) or the Financial Stability Board (FSB);

• The issues raised by stablecoins, particularly those deemed “algorithmic” or pegged to official currencies (fiat currencies), which played a catalytic role in the EU’s legislative agenda;

• How MiCA interacts with other European legislation on financial services: Directive (EU) 2015/849 (anti-money laundering), Directive 2009/110/EC (electronic money), Directive 2013/36/EU (credit institutions), Regulation (EU) No 575/2013 (prudential requirements), Directive 2014/65/EU (MiFID II), Regulation (EU) No 596/2014 (market abuse), Directive (EU) 2015/2366 (payment services, PSD2), etc.

At this stage, our study will focus on the context and genesis of MiCA. In the second part, we will delve into a detailed analysis of each article and section of the regulation.

§2. Genesis of the Crypto-Asset Market and Early Regulatory Initiatives

2.1. The Emergence of Bitcoin and Other Crypto-Assets

The first block of the Bitcoin blockchain was created on January 3, 2009, marking the start of a new era in finance and technology. Bitcoin (BTC) quickly established itself as the first decentralized cryptocurrency, free from central bank control and based on a consensus mechanism known as “proof of work” (PoW).

With Bitcoin’s spectacular price surge, other crypto-assets soon appeared, including Ethereum (ETH) in 2015, offering the possibility to implement smart contracts and create tokens (e.g., ERC-20). This proliferation of projects led to the rise of so-called Initial Coin Offerings (ICOs), often compared to fundraisings in crypto-assets.

2.2. Early National Responses and Regulatory Fragmentation

In the absence of a unified European legislative framework, Member States adopted various approaches:

• Some countries, like Malta or Luxembourg, very early established national regimes favorable to hosting crypto-asset businesses, positioning themselves as hubs for technological competitiveness.

• Others, like France, introduced specific rules for token offerings (through the “ICO” ordinance, then the 2019 PACTE law) and set up an optional license for digital asset service providers (PSAN).

• Still others took more cautious approaches or applied existing laws on securities, electronic money, or anti-money laundering to regulate certain crypto-asset activities.

This fragmentation quickly gave rise to difficulties for companies seeking to operate across several Member States, as well as for consumer protection. In the absence of harmonized cross-border rules, the risk of “regulatory arbitrage” was high.

2.3. Initial Reflection at the European Level: Guidance Documents and “Sandboxes”

European authorities, such as the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA), gradually recognized the gaps in the existing framework. Before MiCA, several reports and opinions were published:

• In its 2014 report, the EBA questioned the legal status of Bitcoin and already recommended coordinated action to oversee service providers operating in this area.

• In 2017 and 2019, ESMA issued Communications on the risks associated with ICOs, highlighting in particular that a number of tokens could be considered financial instruments under Directive 2014/65/EU (MiFID II).

Meanwhile, the European Commission, keen to remain a leader in innovation, explored the potential of blockchain (e.g., the European Blockchain Partnership, the creation of the EU Blockchain Observatory and Forum…).

It was within this environment that the idea of a single regulation, MiCA, took shape, intended to provide legal certainty, financial stability, and balanced growth of the crypto-asset market within the EU.

§3. The MiCA Proposal: The Impact of Stablecoins and International Competition

3.1. The Catalyst Effect of Meta’s (Facebook’s) Libra (ex-Diem)

The European Commission’s proposal on MiCA was heavily influenced by the 2019 announcement of the “Libra” (later renamed “Diem”) stablecoin project led by Facebook (Meta). Libra aimed to create a token pegged to a basket of official currencies, potentially usable by billions of users on Facebook, Instagram, and WhatsApp.

European central banks, particularly the European Central Bank (ECB) and the Banque de France, voiced their concerns over the risk of monetary disruption and potential circumvention of national monetary policies. The main fear was that a stablecoin issued by a tech giant, if widely adopted, could threaten monetary sovereignty or financial stability.

This realization accelerated European efforts: it became necessary to anticipate the possibility that stablecoins could be adopted on a massive scale — hence the desire, in MiCA, to implement a strict regime for “asset-referenced tokens” and for “e-money tokens.”

3.2. International Pressure and FATF Recommendations

In parallel, at the international level, the Financial Action Task Force (FATF) published guidelines requiring crypto exchanges and other providers to comply with anti-money laundering and counter-terrorist financing (AML/CFT) standards. The concepts of the Travel Rule (transmitting sender and beneficiary information for a crypto-asset transfer) and due diligence requirements gradually became widespread.

These recommendations — applied in various forms in multiple jurisdictions (United States, Singapore, Japan, etc.) — also made the EU realize it needed to avoid setting up overly disparate rules by proposing a text covering investor protection, market integrity, and financial stability, while also integrating the AML requirements already outlined in Directive (EU) 2015/849 (the 5th AML/CFT Directive) and subsequent legislation.

3.3. Global Competition: Attracting Innovation and Protecting the Internal Market

The MiCA project was also intended as a competitiveness tool: other major economies, such as the United States and China, were discussing similar regulatory frameworks for crypto-assets. China even launched a digital yuan (CBDC) project, raising various issues related to monetary sovereignty.

The EU wanted neither to “hamper innovation” nor to discourage the growth of blockchain-focused companies; instead, the goal was to offer them a clearly defined and passportable regulatory framework across Member States. Therefore, MiCA had to strike a balance between:

• Promoting innovation;

• Enforcing strict prudential oversight for operators deemed “systemically significant”;

• Protecting consumers effectively;

• Preventing systemic risks (particularly with stablecoins).

§4. The Gaps in Existing Legislation and the Need for New Regulation

4.1. Sector-Specific Texts in Force Before MiCA

Prior to MiCA’s entry into application, the crypto ecosystem had to navigate among various EU texts that could apply, in particular:

• Directive 2014/65/EU (MiFID II): determines whether a token can be considered a financial instrument. If so, its issuer (or provider) is subject to the same obligations as for traditional securities.

• Regulation (EU) No 596/2014 (MAR): deals with market abuse, but is limited to financial instruments admitted to trading on a regulated or equivalent market.

• Directive 2009/110/EC (EMD2): governs electronic money issuance. A token pegged to a fiat currency could fall under the definition of electronic money, but that’s not always clear if the holder does not truly enjoy the right to redeem at par value.

• Directive (EU) 2015/2366 (PSD2): regulates payment services. Certain crypto-asset flows could be considered payment services under specific conditions (for example, if there is a conversion to fiat).

• Anti-money laundering directives (AMLD4, AMLD5, AMLD6): impose due diligence and reporting obligations for certain types of providers (exchange platforms, etc.).

Despite these texts, gray areas remained regarding token definitions, qualifications of various categories of crypto-assets (utility tokens, security tokens, stablecoins, etc.) and prudential obligations for platforms that were not classified as “market operators” under MiFID II.

4.2. Legal Qualification Issues

The major issue was how to categorize tokens:

• If the token grants rights similar to shares, bonds, or fund units, it may be considered a financial instrument and therefore subject to MiFID II.

• If it is pegged to a single currency, perhaps it resembles electronic money (Directive 2009/110/EC);

• If it does not fit any existing category, no EU text required a specific framework (except for any applicable national laws).

This legal uncertainty made life difficult for businesses, which often had to seek rulings from national authorities or try to structure their products in a way that would avoid being reclassified as financial instruments.

4.3. High Risks for Retail Investors

The volatility of crypto-assets, the proliferation of sometimes fraudulent projects (non-transparent ICOs, Ponzi schemes, etc.), and the lack of safeguards comparable to those provided for traditional securities (such as the requirement for a prospectus) highlighted the need for at least a minimum level of transparency for retail investors.

Hence, MiCA introduces, for certain crypto-assets, the obligation to produce a “crypto white paper” including information on the issuer, the stabilization mechanism (if applicable), the investment policy for reserve assets in the case of stablecoins, etc.

4.4. The Absence of a Specific Framework Governing Crypto-Asset Services

Before MiCA, service providers (custody/administration of crypto-assets on behalf of third parties, trading platforms, exchange or advisory services) were not subject to a specific and harmonized regime at the European level (unless they were managing tokenized financial instruments). Prudential obligations, asset segregation, or market abuse safeguards could thus vary from one Member State to another.

With MiCA, the goal is to create a single European passport for these providers, similar to what already exists for asset management companies, credit institutions, or investment firms.

§5. The Position of the European Institutions and the Legislative Procedure

5.1. The Role of the European Commission

The Commission introduced the MiCA proposal on September 24, 2020, as part of the Digital Finance Package. It outlines the main objectives:

• Ensuring consumer protection and market integrity;

• Establishing a proportionate prudential framework for stablecoin issuers (asset-referenced tokens and e-money tokens);

• Creating a single passport for crypto-asset service providers;

• Supporting innovation and enhancing the EU’s attractiveness in the blockchain sector.

5.2. The European Parliament and the Council of the European Union

The Commission’s proposal is subject to the ordinary legislative procedure, involving examination and adoption by the European Parliament and the Council. The main stumbling blocks during negotiations included:

• The precise definition of stablecoins and the conditions for their issuance (redemption rights, reserve requirements, own funds regime);

• The numerical thresholds at which a stablecoin is deemed “significant” (triggering closer scrutiny by the EBA);

• The exact scope of exclusions (unique and non-fungible crypto-assets, i.e., NFTs, or crypto-assets limited to a closed network);

• Sustainability issues (the energy impact of Proof of Work) and the requirement to disclose carbon footprint information;

• The proportionality of requirements imposed on SMEs and startups specializing in blockchain technology.

The European Parliament approved the final text in the first half of 2023, followed by the Council of the EU, resulting in official publication in the Official Journal of the EU in June 2023.

5.3. The Involvement of the European Supervisory Authorities (ESAs)

The European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA) were consulted throughout the process.

MiCA strengthens their role, particularly for the EBA, which is mandated to directly supervise issuers of “significant” stablecoins (in partnership with the relevant central banks) and to ensure the proper application of prudential rules.

Accordingly, MiCA provides for supervisory colleges composed of the EBA, national competent authorities, the ECB (and possibly other national central banks), along with mutual consultation procedures in case of authorization or withdrawal of licenses.

§6. Main Objectives Pursued by MiCA

6.1. Ensuring a High Level of Consumer Protection and Transparency

For crypto-asset issuers (other than stablecoins):

• Obligation to draft a white paper describing the project, risks, rights and obligations associated with the tokens, underlying technology, etc.

• Power for the competent authority to suspend or prohibit a public offering if requirements are not met (e.g., if the document is misleading or incomplete).

For asset-referenced tokens and e-money tokens:

• Additional requirements, such as establishing a reserve of assets, redemption rights, prohibition against offering interest to holders based on holding duration, etc.

• A stricter regime if these stablecoins reach, or are likely to reach, systemic significance (a numerical definition in MiCA).

6.2. Establishing Robust Supervision and Reducing Systemic Risks

MiCA provides for collaboration among:

• National authorities (which grant licenses to service providers and non-systemic issuers);

• The EBA, competent for significant asset-referenced tokens and significant e-money tokens;

• ESMA, playing a central role in market abuse regulation and borderline cases (to determine whether a token falls under other sectoral regimes like MiFID II).

Furthermore, the European Central Bank (ECB) or the relevant national central bank must be consulted if there is a threat to monetary policy or the smooth functioning of payment systems.

6.3. Offering a European Passport for Crypto-Asset Service Providers

Service providers (exchanging crypto against fiat or other crypto, operating trading platforms, placing crypto-assets, custody, etc.) must obtain authorization from the competent authority in their home Member State, under the conditions set out by MiCA.

This license is passportable throughout the EU, thereby enabling businesses to set up shop easily in the single market while ensuring a minimal set of prudential and organizational requirements (own funds, risk management policies, security mechanisms, etc.) for user confidence.

6.4. Combating Market Abuse and Price Manipulation

MiCA adopts a similar logic to Regulation (EU) No 596/2014 (MAR) for financial instruments, adapting it to the crypto-asset market:

• Prohibiting insider dealing and unlawful disclosure of inside information;

• Prohibiting market manipulation (false information, wash trading, pump and dump, etc.), including on crypto platforms.

Crypto-asset service providers must implement monitoring systems to detect potential abuse and are required to report suspicious transactions to the authorities.

§7. Technical and Political Challenges in Drafting MiCA

7.1. The Integration of Environmental Measures

A thorny issue concerned the environmental impact of some consensus mechanisms (in particular, proof of work, used by Bitcoin). Some European Parliament members advocated banning energy-intensive mining or imposing an outright ban on Bitcoin in Europe, which was ultimately set aside. Still, MiCA requires issuers (and in some cases, service providers) to publish information on negative effects on the climate or environment, thereby ensuring some degree of transparency.

7.2. The Boundary Between Crypto-Assets and NFTs

NFTs (non-fungible tokens), representing unique digital objects (artworks, collectibles, etc.), raised questions: are they covered by MiCA? In the end, MiCA excludes unique, non-fungible crypto-assets on the grounds that their limited fungibility reduces financial risks. However, if an NFT is issued “in large series” and displays fungibility characteristics, it could be reclassified as a crypto-asset subject to MiCA.

7.3. Money Laundering and Data Protection Considerations

MiCA incorporates the need for crypto-asset service providers to comply with European anti-money laundering and counter-terrorist financing rules. There was intense debate regarding the so-called “travel rule,” which requires the transmission of information on the sender and recipient for every crypto-asset transfer.

Moreover, Regulation (EU) 2016/679 (GDPR) sets strict data protection rules, which can create issues when blockchain technology, by nature, makes certain data (transactions) immutable. MiCA thus emphasizes that none of its provisions may infringe on the GDPR and that personal data must not be published on a blockchain if it violates the principle of data minimization.

7.4. Crypto-Asset Lending and Borrowing

MiCA does not directly address crypto lending or borrowing services (lending/borrowing), which have developed rapidly, especially through decentralized finance (DeFi) protocols. Article 94(4) of the regulation indicates that the Commission will assess the need for a broader framework, particularly regarding DeFi.

Setting up a specific regime for DeFi or crypto lending could be considered in the future through delegated acts or new legislation.

§8. The Links Between MiCA and Other European Digital Finance Initiatives

8.1. The “Digital Finance Package”

MiCA is part of a broader set of measures presented by the Commission in September 2020:

• A proposed regulation on digital operational resilience (DORA);

• A retail payments strategy;

• A European digital finance strategy to foster innovation and the use of new technologies (including AI and blockchain).

The objective is to establish a single digital market in the financial sector, ensuring fair competition and user protection.

8.2. The DLT Pilot Regime for Market Infrastructures

At the same time, another regulation known as the “DLT Pilot Regime” (Regulation (EU) 2022/858) enabled, on a trial basis, the use of distributed ledger technology (DLT) for trading and settling tokenized financial instruments.

While MiCA focuses primarily on crypto-assets not classified as financial instruments (or not subject to sectoral directives), the DLT Pilot Regime aims to temporarily adapt certain MiFID II and CSDR rules, etc., so that exchanges and central securities depositories can test blockchain for traditional markets.

8.3. Future EU AML Legislation Specific to Crypto-Assets

The European Commission also presented, in July 2021, an AML/CFT legislative package providing for the creation of a European Anti-Money Laundering Authority (AMLA) and extending the identity verification requirement to all crypto-asset transactions (including unhosted wallets, subject to exceptions).

This package aligns with MiCA to ensure that crypto service provision within the EU meets AML/CFT standards.

§9. Finalization and Official Adoption of MiCA

9.1. Steps Before Entry into Force

After being adopted by the European Parliament and the Council, the MiCA regulation was published in the Official Journal of the EU on June 9, 2023. Like most EU regulations, MiCA is directly applicable in all Member States without national transposition.

However, to allow industry players time to adapt, MiCA provides for a delayed application period (usually between 12 and 18 months) from the date of official publication. This means that much of the regulation will actually take effect in mid- or late 2024.

9.2. Transitional Provisions

The regulation also provides for several transitional measures:

• Crypto-asset issuers already in existence before MiCA’s effective application may continue their activities, provided they meet certain minimum requirements (e.g., informing holders).

• Crypto-asset service providers who previously held a national registration or authorization can operate temporarily pending the issuance of a MiCA license or remain under a transitional regime, subject to the Member State’s decision.

9.3. Delegated Acts and Technical Standards

MiCA delegates to the Commission and the European supervisory authorities (notably the EBA and ESMA) the task of preparing numerous delegated acts, regulatory technical standards (RTS), and implementing technical standards (ITS) to clarify:

• More detailed requirements for the white paper’s content;

• How to calculate and monitor reserve assets for stablecoins;

• Procedures for granting and withdrawing authorization;

• Procedures for sharing information on market abuse, etc.

These regulatory and technical elements will take several months to develop and will be crucial in ensuring MiCA is operational and uniformly applied across the Union.

§10. Towards a New Era of European Regulation of Crypto-Assets?

MiCA is a comprehensive, ambitious response to the rapid growth of crypto-assets. The product of years of discussions, political negotiations, and technical expertise, it provides a unique legal framework that aims to reconcile legal certainty, consumer protection, market integrity, and innovation promotion in the crypto ecosystem.

• From a historical point of view, MiCA appears as the logical outcome of Europe’s growing awareness of both the risks and opportunities connected to blockchain and digital assets.

• From a legal perspective, it fills the gaps left by existing legislation, clarifies the classification of crypto-assets, and imposes a set of prudential and governance rules on issuers and service providers.

• From an economic and political point of view, MiCA addresses the need to protect the internal market, prevent market abuse, limit systemic risks linked to stablecoins, and bolster the EU’s role as a major player in the digital arena.

However, certain issues remain: decentralized finance (DeFi), mass-market NFTs, crypto-asset lending and borrowing, and the future AML/CTF framework dedicated to crypto-asset transfers are set to be the subject of further legislative developments.

The second part of this article will be dedicated to the detailed analysis of each article of the MiCA regulation, in order to illustrate precisely how these new rules will apply in practice. We will specifically cover:

• The categories of crypto-assets covered by the regulation;

• The specific requirements for asset-referenced tokens and e-money tokens;

• The licensing conditions and organizational obligations for crypto-asset service providers;

• The provisions on market abuse, supervision, and sanctions;

• The respective roles of the EBA, ESMA, and national authorities.

In short, MiCA is poised to become the cornerstone of European crypto-asset regulation, ushering in a new era in which innovation and investor protection will strive to coexist within a stable and predictable legal framework.

In the second part of this blog post, we will examine MiCA’s provisions point by point, offering a critical review of each title and discussing the practical implications for crypto-asset market participants in Europe.

Second Part: The Innovations of the MiCA Regulation

§1. General Introduction

The MiCA Regulation (Markets in Crypto-Assets Regulation) aims to establish a unified legislative framework for issuing, offering to the public, trading, and providing services related to crypto-assets throughout the European Union. In the first part of our study, we examined the historical and regulatory background that led European institutions to propose this legislation, as well as the main macroeconomic, political, and technological issues associated with regulating crypto-assets.

In this second part, we will analyze the key innovations introduced by MiCA, referring to Articles 1 and onward of the official text (as they appear in the adopted version). The goal is to highlight MiCA’s specific and significant advancements, article by article, while underlining particularly novel features for the blockchain industry and traditional financial actors.

§2. Scope (Article 1)

2.1. Objectives and Scope

Article 1 of the MiCA Regulation clearly defines its scope by specifying that it covers crypto-asset issuers as well as providers of related services (often called CASPs: Crypto-Assets Service Providers). The main objectives stated by the legislator are:

• Establishing a framework of trust: by guaranteeing transparency and accountability standards for issuers;

• Protecting consumers and investors: through disclosure obligations and supervisory mechanisms;

• Preventing systemic risks: by imposing prudential requirements, notably for tokens that could have a strong impact on financial stability.

MiCA’s scope is meant to be exhaustive: any natural or legal person issuing crypto-assets or providing services related to crypto-assets within the European Union is potentially subject to it, except for specific exceptions regarding certain types of tokens or services already strictly governed by other legislation (such as existing rules on electronic money or payment services).

2.2. Regulatory Justifications

The emergence of a blockchain-based ecosystem, the surge in crypto-asset transaction volumes, and the multiplication of stablecoin projects (assets aiming for stability) greatly caught regulators’ attention. Article 1 of MiCA highlights the need for legislative intervention to:

• Harmonize rules and prevent legal fragmentation within the EU;

• Foster innovation while safeguarding the public interest, financial stability, and public order;

• Ensure fair competition between traditional players and new entrants.

§3. Key Definitions and Terminology (Articles 2–3)

3.1. Digital Assets, Crypto-Assets, and Tokens

Articles 2 and 3 introduce the technical vocabulary by defining the main concepts on which the regulation is based. Among the key terms:

• Crypto-asset: any digital representation of a value or a right, which can be transferred and stored electronically, using distributed ledger or similar technology.

• Asset-referenced tokens: tokens aiming to maintain a stable value by referencing a basket of assets (currencies, commodities, etc.).

• E-money tokens: tokens representing a specific monetary value, which in some respects align with electronic money as defined in the relevant European directive.

This section is crucial because it clarifies the distinction among different token types, paving the way for varied, specialized legal regimes.

3.2. Roles of Stakeholders: Issuers, CASPs, and Users

MiCA introduces or updates definitions relating to issuers (entities responsible for creating tokens), service providers (offering custody, exchange, advisory services, etc.), and end users. Articles 2 and 3 also outline concepts of crypto-asset exchanges, trading platform operators, crypto-asset custodians, etc. This mapping of stakeholders is vital to understanding which obligations apply to each party.

§4. Categories of Crypto-Assets Covered by MiCA (Articles 4–10)

4.1. Asset-Referenced Tokens (Stablecoins)

Articles 4 to 6 specifically address asset-referenced tokens, often called “stablecoins.” These are viewed as posing higher systemic risk because their valuation hinges on reference assets (baskets of currencies, financial instruments, etc.). MiCA emphasizes:

• The necessity of guarantees (reserves in liquid and safe assets);

• Transparency regarding the composition and management of these reserves;

• A reinforced oversight mechanism by the competent authorities.

4.2. E-Money Tokens

Articles 7 and 8 deal with e-money tokens, similar to stablecoins but pegged to a single fiat currency (for example, the euro). The regulation partially equates them to electronic money, requiring issuers to comply with the e-money directive (2009/110/EC). Among specific obligations:

• Holding an authorization as an electronic money institution;

• Meeting own funds requirements and consumer protection standards applicable to e-money institutions.

4.3. Utility Tokens

Articles 9 and 10 introduce utility tokens, which grant their holder a right of access to a product or service on a blockchain platform. MiCA recognizes their difference from financial instruments, provided they do not grant rights similar to shares or bonds. Main points include:

• Transparency: a white paper must explain the project’s purpose, technical details, and governance;

• The issuer’s liability: in particular, in case of network malfunctions, non-delivery of services, or fraud.

4.4. Investment Tokens and Hybrid Tokens

Although MiCA primarily targets crypto-assets not covered by traditional financial markets regulations (MiFID II), a gray area remains for hybrid tokens that combine features of both financial instruments and utility tokens. In such cases, Article 10 refers to the potential application of other existing regulations, underscoring the legislator’s intent not to duplicate existing rules.

§5. Authorization and Licensing of Issuers (Articles 11–19)

5.1. Conditions for Issuance

Articles 11 to 14 lay out requirements that must be satisfied prior to issuing crypto-assets:

• The publication of a white paper containing detailed information on the company, project, underlying technology, risks, governance, etc.;

• The obligation to file a license application with the competent authority (often the national financial markets authority) when it comes to asset-referenced tokens or e-money tokens;

• Demonstrating the issuer’s financial soundness, through capital guarantees or specific insurance policies.

5.2. Guarantees and Financial Reserves

For asset-referenced tokens and e-money tokens, Articles 15 and 16 mandate creating reliable reserves or collateral to cover the value of tokens issued and protect holders in the event of mass redemption. The regulation specifies:

• Criteria for liquidity and diversification of reserve assets;

• Methods for independent third-party verification and auditing of these reserves;

• Penalties for breaches (under-coverage, lack of transparency, etc.).

5.3. Governance and Compliance

Articles 17 to 19 stress the importance of solid governance, including:

• The establishment of a competent and honest management team;

• The existence of internal control and risk management procedures;

• The appointment of a compliance officer, responsible for ensuring MiCA compliance and adherence to other relevant laws (AML rules, etc.).

§6. Transparency Obligations (Articles 20–28)

6.1. White Paper on Crypto-Assets

The white paper is central to the transparency required by MiCA. Articles 20 to 22 detail its minimum content:

• Technical description of the protocol, the business model, and governance;

• Financial information: funding plan, use of proceeds, projections;

• Main risks: price volatility, security vulnerabilities, legal risks.

This white paper requirement partly echoes the prospectus obligation for securities but is tailored to the specificities of distributed ledger technologies.

6.2. Pre-Contractual Information

Articles 23 to 25 require issuers to inform potential buyers clearly and non-misleadingly about:

• The rights and obligations attached to the tokens;

• User protection measures, particularly in the event of hacking or bankruptcy;

• Any applicable fees for token subscriptions or transfers, if relevant.

MiCA emphasizes clarity and readability to prevent deceptive marketing practices that have sometimes plagued the ICO sector.

6.3. Liability and Sanctions in Case of Omission

If there is an omission or false statement in the white paper or pre-contractual documents, Articles 26 to 28 provide for:

• The issuer’s civil liability, giving investors the right to claim compensation;

• Administrative sanctions (fines, temporary bans on token issuance, etc.) imposed by supervisory authorities.

This liability regime bolsters the credibility of disclosures and acts as a deterrent for fraudulent ICO practices.

§7. Obligations for Crypto-Asset Service Providers – CASPs (Articles 29–42)

7.1. Authorization and Supervision Conditions

Articles 29 to 33 create an authorization regime for Crypto-Asset Service Providers (CASPs). The covered services notably include:

• Custody and administration of crypto-assets on behalf of third parties;

• Operation of trading platforms;

• Exchange of crypto-assets for fiat currencies or other crypto-assets;

• Advisory, portfolio management, etc.

To operate legally, a CASP must:

• Obtain authorization from the competent authority of its Member State of origin;

• Meet capital requirements, which vary according to the size of the business and the associated risks;

• Undergo regular audits and ongoing compliance checks.

7.2. Conduct Rules and Best Practices

Articles 34 to 37 set out conduct rules aimed at protecting clients and ensuring market integrity:

• Minimum capital thresholds and insurance against operational risks (e.g., cyberattacks);

• Conflict of interest policies to prevent abuse of dominant positions;

• Duties of advice and disclosure, partly drawing on standards from traditional finance (MiFID II).

7.3. Segregation of Assets and Investor Protection

Articles 38 to 42 require segregating clients’ assets from those of the CASP, in order to:

• Avoid conflicts of interest and misappropriation of funds;

• Protect investors in the event of the provider’s insolvency;

• Facilitate the return of assets in case of liquidation.

This measure is seen as a major advantage to strengthen trust in the crypto ecosystem, often shaken by scandals involving exchange platforms.

§8. Prudential Regime and Capital Requirements (Articles 43–49)

8.1. Systemic Risk Management

Articles 43 and 44 introduce measures inspired by banking regulation to prevent systemic risks. In the case of asset-referenced tokens with a high market value (potentially affecting market stability), authorities may:

• Impose higher capital requirements;

• Restrict certain activities considered too risky (e.g., heavy leverage on derivative products linked to tokens).

8.2. Required Own Funds and Calculation Methods

Articles 45 to 47 specify how issuers and CASPs must calculate own funds, taking into account:

• The volume of assets under management;

• Counterparty and market risks;

• Operational risks (technical vulnerabilities, cyberattacks, etc.).

The text aims to adapt the concept of prudential ratios (similar to those in CRD/CRR for banks) to the crypto-asset universe without unduly stifling innovation through disproportionate requirements.

8.3. Risk Management Policies

Beyond capital obligations, Articles 48 and 49 require issuers and CASPs to implement risk management policies, including:

• Identification and monitoring of operational, technological, market, and liquidity risks;

• Business continuity plans (continuity of operations, disaster recovery, etc.);

• Periodic assessment of how resilient the business model is under various stress scenarios.

§9. Supervision and Role of Competent Authorities (Articles 50–60)

9.1. European Coordination (ESMA, EBA)

Articles 50 and 51 highlight the shared competence among:

• National authorities (Financial Market Authorities, National Central Banks) that supervise issuers and CASPs on their territories;

• European agencies like ESMA (European Securities and Markets Authority) and the EBA (European Banking Authority), responsible for coordination and establishing common guidelines.

This cooperation intends to ensure the consistent enforcement of MiCA across the EU and limit regulatory arbitrage among Member States.

9.2. Enforcement Powers, Inspections, and Investigations

Articles 52 to 58 grant competent authorities:

• The right to carry out unannounced inspections;

• The power to request information and mandate the production of documents;

• The ability to impose administrative sanctions (fines, suspensions, license withdrawal) for MiCA violations.

The text also strengthens cross-border collaboration, enabling authorities to conduct joint investigations and share data in order to combat fraud and money laundering.

9.3. Cross-Border Cooperation

Articles 59 and 60 outline how Member States cooperate and exchange information to:

• Facilitate the monitoring of issuers and CASPs operating in multiple countries;

• Avoid double sanctions for the same offenses;

• Pool technical and legal expertise more efficiently.

§10. Investor and Consumer Protection (Articles 61–68)

10.1. Complaints and Redress Mechanisms

Articles 61 to 63 establish clear procedures for crypto-asset holders wishing to file a complaint or assert their rights in the event of a dispute. Issuers and CASPs must:

• Provide a customer service or dedicated contact;

• Observe specific processing and response times;

• Facilitate, if necessary, recourse to mediators or alternative dispute resolution bodies.

10.2. Fee Transparency and Disclosure

MiCA also enhances disclosure requirements regarding fees, commissions, and risks related to crypto services. Articles 64 to 66 stipulate:

• Clear communication of transaction, custody, and withdrawal fees;

• An obligation to provide educational materials (guides, FAQs, etc.) to explain the risks to non-expert investors.

10.3. Compensation Mechanisms

To protect users in case a provider defaults, Articles 67 and 68 urge Member States to create or promote compensation schemes similar to those in traditional financial markets. However, the text remains cautious about establishing a single European guarantee fund, given the variety of assets and the sector’s rapid pace of change.

§11. Market Abuse and AML Provisions (Articles 69–75)

11.1. Fighting Market Manipulation

Articles 69 to 71 extend existing rules on market abuse (notably under the Market Abuse Regulation, MAR) to certain crypto-assets within the MiCA scope. Banned practices include:

• Price manipulation (wash trading, spoofing, layering, etc.);

• Insider trading, if the tokens grant rights comparable to financial instruments.

11.2. Reporting and Monitoring Framework

To combat unlawful activities, Articles 72 to 74 provide for:

• A register of suspicious operations and market abuse reports to be used by authorities;

• Heightened obligations for CASPs to detect and report high-risk transactions.

The text stresses cooperation among national and European authorities, as well as with international bodies (like the FATF).

11.3. AML/CFT Compliance Measures

Although MiCA is not the main piece of legislation governing anti-money laundering and counter-terrorist financing (AML/CFT), Article 75 explicitly refers to the obligations of Directive (EU) 2015/849 (AMLD). CASPs and issuers must:

• Implement KYC (Know Your Customer) procedures and transaction monitoring;

• Report suspicious transactions to Financial Intelligence Units.

§12. Market Infrastructures and Technological Innovation (Articles 76–85)

12.1. Experimentation Framework and Regulatory Sandboxes

To encourage innovation, MiCA recognizes, in Articles 76 and 77, that national regulators may set up sandboxes in which:

• Startups and innovative businesses can test their crypto/blockchain solutions in a controlled and supervised environment;

• Authorities can gather feedback on regulatory aspects that need improvement or clarification.

This flexible approach aims to foster the emergence of new use cases in a secure setting and keep projects from moving outside the EU.

12.2. Integrating Blockchain Technology

Articles 78 to 81 encourage exploring distributed ledger technology (DLT) in market infrastructures (exchanges, clearinghouses, central depositories). MiCA complements the EU DLT Pilot Regime regulation, allowing certain platforms to trade and settle tokenized financial securities under a pilot framework.

12.3. Interoperability and Technical Standards

Articles 82 to 85 call on ESMA and the European Commission to promote technical standards supporting interoperability among different blockchains and services. The objectives include:

• Reducing technical barriers to crypto-asset circulation;

• Standardizing the way information is presented in white papers and periodic reports;

• Stimulating efficiency and the EU’s competitiveness on the global stage.

§13. Transitional Provisions and Phased Entry into Force (Articles 86–90)

13.1. Implementation Timeline

Articles 86 and 87 establish a phased schedule:

• From the time the regulation is published in the Official Journal of the EU, there is typically an 18-month window for existing operators to adjust;

• Certain provisions related to systemically significant stablecoins take effect more quickly, given the associated risk.

13.2. Transitional Measures for Existing Players

Articles 88 to 90 outline measures to help entities already active before MiCA was adopted:

• Recognition of previous equivalent licenses, subject to checking compliance with MiCA requirements;

• Administrative support and dedicated training;

• Possibility of requesting extra time to upgrade certain technical infrastructures or strengthen own funds.

§14. Future Outlook and Impact on the Ecosystem

The MiCA Regulation is intended as a starting point for regulating crypto-assets at the European level. Several future considerations stand out:

• Technological evolution: the rise of new forms of crypto-assets (NFTs, DeFi, metaverse) may require further adaptations or new complementary regulations;

• International coordination: the European framework could serve as a reference for other jurisdictions, but needs alignment with the rules of the G20, IMF, BIS, etc.;

• Reshaping the financial system: over the long term, MiCA could boost the wider tokenization of assets (real estate, commodities, etc.) and spur changes in traditional finance.

From the perspective of market participants, the legal certainty provided by MiCA and the reduction in regulatory uncertainty could foster:

• Professionalization and consolidation of the industry;

• Entry of institutional investors and large banks reassured by a harmonized framework;

• Development of new services (regulated custody solutions, crowdfunding platforms, etc.).

Nevertheless, some fear overregulation might hamper the flexibility of startups and stifle innovation. MiCA’s success will depend on balancing investor protection with safeguarding European competitiveness.

Conclusion

Regulation (EU) 2023/1114 on Markets in Crypto-Assets (Articles 1 and onwards) introduces an innovative and comprehensive scheme to regulate crypto-assets in the European Union. Covering the entire token lifecycle — from issuance to service provision — it aims to:

• Harmonize national rules and provide legal certainty for stakeholders;

• Enhance consumer protection through transparency, governance, and guarantee obligations;

• Foster innovation by establishing experimentation opportunities and encouraging interoperability.

Throughout this second part, we have highlighted the main pillars of MiCA: differentiated treatment of various token types (stablecoins, e-money tokens, utility tokens, etc.), prudential provisions, regulatory oversight, combating fraud and money laundering, and transitional measures. Altogether, these rules could position the EU as one of the most forward-looking and attractive regions for crypto-asset regulation.

Nonetheless, multiple challenges remain, notably the practical implementation of the regulation in each Member State and the constant adaptation of the regulatory framework to keep pace with this fast-evolving sector. MiCA is thus not a definitive end point, but rather a first stepping stone towards building a digital single market where blockchain and crypto-assets can develop responsibly and securely.