Crypto-assets regulatory frameworks : the EU’s approach

Abstract

Growing public interest in the crypto asset market and scandals in this sector have pushed governments to enact crypto-currency legislation to provide legal stability in the field, encourage development, and provide investor protection and transparency. Certain European member states have already enacted crypto asset laws to ensure legal certainty and help the industry expand. These multiple crypto laws in Europe have also produced legal complexity about the treatment of crypto assets at EU level, as these national rules are limited in their application and are confined to individual member states, thus creating fragmentation within the union. Also, EU institutions found regulatory flaws within the European legal framework that precluded certain crypto-assets from current EU legislation. Many countries attempted to address those gaps in their current regulation, but a European framework with identical requirements for crypto-assets was needed to ensure a level playing field in the EU. In September 2020, the European Commission published a proposed regulation for crypto assets: Markets in Crypto Assets Regulation (MICA), which is part of the EU's digital finance package and includes a digital finance strategy, legislative proposals on crypto-assets, and digital resilience for a competitive EU financial sector that gives consumers access to innovative financial products while ensuring consumer protection and financial stability. Importantly, MICA regulation is a new legislative proposal that aims to bring crypto-assets, issuers, and service providers under one regulatory framework at the EU level. This paper analyses the European Commission's proposal for regulating crypto assets, Markets in Crypto Assets Regulation (MICA), which, once enacted, will apply to all EU member states and govern all crypto asset issuers and service providers. The paper will examine crypto-asset categories, services, and how the proposed regulation protects consumers by applying a robust framework. The report will highlight MICA’s benefits and try to identify any shortcomings or challenges in the proposed regulation.