MiCAR’s enforcement: An innovative crypto-friendly regulatory landscape

 Written by Efi Thoma, Lawyer

Does the highly anticipated rise of cryptos in the US under Trump administration align with MiCAR’s (Markets in Crypto-Assets EU Regulation) enforcement in the EU regulatory landscape?

Even after the collapse of FTX illustrating the dire need for imposing strong regulations to protect investors in crypto assets, the current crypto regulatory progress in the U.S. is ambiguous and remains stalled. This outcome leads to the exacerbation of the lack of faith in the crypto ecosystem by highlighting the unaccountability of the crypto actors with regard to money laundering, financing of terrorism and other illegal activities. In 2023 the International Organization of Securities Commissions has laid out specific recommendations with the aim of imposing some global ground rules on the crypto and digital assets, given the global transactional activities on the crypto sector and the increasing need for the protection of investors in crypto assets.

While the foregoing highly ambitious international alignment on global crypto currency regulations is work in progress, the European Union, has successfully implemented an innovative, comprehensive and uniform set of rules under MiCAR by adopting a robust regulatory framework to oversee crypto assets and associated activities. The aforementioned regulatory framework, which is directly enforced in the legal systems of the EU Member States, seeks to offer a highly anticipated clarity and legal assurance for issuers, service providers (CASPs) and investors engaged in crypto assets. Simultaneously, it provides enhanced investor protection, market integrity and financial stability in the growing crypto ecosystem.   

CASPs play a predominant role in this evolution by facilitating the adoption, creation, trading, distribution and management of crypto assets while offering a range of services and platforms. They face a challenging new regulatory framework with critical timelines to efficiently adapt which does not include only MiCAR but also AML-CFT Directive (as amended by Regulation (EU) 2023/1113 known as the "TFR"), DORA Regulation (Regulation (EU) 2022/2554) and the TFR Regulation.

The MiCAR provisions relating to CASPs apply since 30 December 2024. Cyprus Securities and Exchange Commission (“CySEC”) sets out transitional rules for CASPs. The National Regulator allows CASPs operating before 30 Dec 2024 to continue services until 1 July 2026 or MiCAR authorization. In addition, as CySEC’s Chairman explicitly stated the MiCAR Regulation excludes from its scope the crypto-assets that qualify as “financial instruments”. The latter are subject to pre-existing regulations governing financial instruments. The criteria for qualifying a crypto-asset as a financial instrument are set out in guidelines published by ESMA.

It is important to note that CASPs are required to have a comprehensive knowledge of concepts and requirements covered under MiCAR, including expectations relating to conduct, operating and prudential requirements, as well as be compliant with licensing, operating and conduct requirements in close collaboration with their national competent authorities who are authorized to license and oversee their operations, in accordance with the applicable national law.

* Efi Thoma is Lawyer LL.M.,MIS, Member of Cyprus Bar Association & Holder of Advanced CySEC Certification

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