The European Economic Area (EEA) is navigating a new era of crypto regulation with the introduction of the Markets in Crypto-Assets Regulation (MiCA). This new, unified regulatory framework will standardize the oversight of crypto assets, issuers, and service providers, and replace the regulations currently in place throughout the European Union (EU).
Titles III and IV of MiCA, focusing on stablecoins (a type of cryptocurrency that maintains a stable value, usually by being pegged to traditional currencies like the euro), were enforced on June 30, 2024. Let’s discuss what you need to know about the changes.
3 Main Purposes of MiCA
MiCA aims to foster innovation while ensuring consumer protection, market integrity, and financial stability across the EU. To simplify it further, MiCА was designed for three main reasons:
1. Create a Unified Regulatory Framework
MiCA will replace different individual, national regulations with a single, comprehensive framework that applies to all counties within the EU.
2. Establish Clearer Rules for Crypto Entities
The new regulation will establish clearer guidelines for crypto asset service providers (CASP) and token issuers.
3. Promote Regulatory Certainty for Crypto Assets
MiCA aims to provide more regulatory clarity for crypto assets that do not fall under existing financial regulations.
What Are Titles III and IV of MiCA?
Titles III and IV of MiCA are sections that introduce specific rules for companies issuing stablecoins within the EEA. These sections require them to undergo a licensing procedure, and only those entities that meet MiCA’s delicate requirements will be authorized to issue and offer stablecoins in the region.
Under MiCA, stablecoins are categorized into two main types:
1. E-Money Tokens (EMTs)
These stablecoins are pegged to a single official currency, functioning similarly to electronic money (e.g., Tether [USDT] and USD Coin [USDC].)
2. Asset-Referenced Tokens (ARTs)
These stablecoins aim to achieve stability by referencing multiple assets, like a mix of currencies, commodities, or other crypto-assets (e.g., Dai [DAI] and Pax Gold [PAXG].)
What Are the Compliance Requirements for Stablecoin Issuers?
MiCA is poised to significantly reshape the stablecoin market, affecting not just the EU but the global landscape. Stablecoin issuers must comply with certain requirements in light of the enforcement of MiCA’s Titles III and IV, and non-compliance may lead to sanctions, such as prohibitions on offering certain stablecoins within the EEA.
Here are the compliance requirements for EMT and ART issuers:
EMT Issuers
These issuers must be authorized as either a credit institution or an electronic money institution (EMI). Holders must be able to claim against the issuer at any time for the equivalent value of the referenced currency.
ART Issuers
These issuers must obtain authorization from relevant authorities and have their white paper approved before public offerings. Issuers are required to maintain a reserve of assets to back the token value for protection against market and currency risks.
What Is MiCA’s Impact on Ka.app?
As EEA countries have a specific timeframe to adopt, implement, and enforce the MiCA regulations, it could take some more time for VASP/CASP entities to apply for the new European regulations, including Ka.app. While the changes do not affect us at the moment, our legal team is closely monitoring potential changes, while preparing the necessary documents and adjustments required to comply with MiCA.
We are committed to transparency, compliance, and security, so rest assured that we will make an announcement should there be any changes to our offerings or processes in the future.
FAQ
Who regulates the MiCA?
MiCA is regulated by the EU. The regulation was developed and is enforced by the European Commission, which is responsible for proposing and implementing EU legislation. The European Commission works in conjunction with national regulatory authorities in each member state to ensure that the provisions of MiCA are applied uniformly across the EEA.
What is a stablecoin?
A stablecoin is a type of cryptocurrency designed to offer more stability than more volatile digital currencies. They are pegged to a stable asset, such as traditional currencies like euro, or commodities like gold. This pegging means the value of a stablecoin aims to remain consistent rather than fluctuate dramatically with market trends.
Stablecoins serve various purposes in the digital currency world. They make it easier for people to conduct transactions, settle trades, and hedge against the significant price swings often seen in the crypto market. Because of their stability, they are also used for everyday transactions and are considered a bridge between the traditional financial world and the emerging digital economy.
What are the most popular stablecoins?
Some of the most popular stablecoins in the market include USDT, USDC, DAI, and TrueUSD (TUSD).
Are stablecoins regulated by MiCA?
Yes, stablecoins are regulated under MiCA within the EEA. MiCA provides a comprehensive regulatory framework specifically designed for crypto assets, including stablecoins like e-money tokens and asset-referenced tokens. This regulation aims to ensure consumer protection, promote market integrity, and uphold financial stability by setting standardized rules across EU member states.
