The Markets in Crypto Assets Regulation (MiCAR) aims to create a broad EU regulatory framework for the issuance of, intermediating and dealing in, crypto assets. MiCAR entered into force in June 2023.
At present, only certain crypto asset service providers (CASPS) are subject to anti-money laundering and terrorist financing rules under the 5th Anti-Money Laundering Directive (AMLD5). In the Netherlands, these rules have been implemented in the Dutch Money Laundering and Terrorist Financing Prevention Act (Wet ter voorkoming van witwassen en financieren van terrorisme).
MiCAR will introduce licensing and conduct of business requirements as well as a market abuse regime with respect to crypto assets.
MiCAR includes a substantial number of Level 2 and Level 3 measures that must be developed before the new regime becomes applicable (within a 12-to-18-month deadline depending on the mandate). During the implementation phase of MiCAR, ESMA in close cooperation with the EBA, EIOPA, and the ECB is consulting with the public on a range of technical standards that will be published consecutively in three packages. The aim is to deliver draft level 2 and 3 measures that incorporate feedback from the public as soon as possible. The date for the entry into application of the measures is subject to their adoption by the European Commission and approval by the European Parliament and the Council of the EU.
In July 2023, ESMA published its first consultation paper regarding the MiCAR. The consultation package is the first of three consultation packages and covers certain proposed rules applicable to CASPs.
The first consultation package includes technical standards for the following mandates:
Article 60(13) MiCAR: Regulatory Technical Standards (RTS) on content of notification from selected entities to national competent authorities (NCAs);
Article 60(14) MiCAR: Implementing Technical Standards (ITS) on forms and templates for notification from entities to NCAs;
Article 62(5) MiCAR: RTS on the content of the application for authorization for CASPs;
Article 62(6) MiCAR: ITS on forms and templates for CASP authorization application;
Article 71(5) MiCAR: RTS on complaint handling procedure;
Article 72(5) MiCAR: RTS on management and prevention, disclosure of conflict of interest; and
Article 84(4) MiCAR: RTS on intended acquisition information requirements.
The consultation period runs until 20 September 2023. ESMA will consider the feedback received to this consultation and expect to publish a final report and submit the draft technical standards to the European Commission for endorsement by 30 June 2024 at the latest.
ESMA intends to publish its second and third consultation packages in October 2023 and Q1 2024.
In July 2023, the European Banking Authority (EBA) also published a consultation paper consisting of two technical standards in relation to the application for authorization to be submitted by legal persons or other undertakings established in the EU intending to offer to the public or seek admission to trading of asset-referenced tokens (ARTs). The EBA’s consultation runs until 12 October 2023. The draft RTS will be submitted to the European Commission for endorsement following which they will be subject to scrutiny by the European Parliament and the Council before being published in the Official Journal of the European Union. The draft ITS will be submitted to the European Commission for endorsement and publication in the Official Journal of the European Union.
A. Consultation Paper ESMA
Please find below a short description of each of the draft RTS and draft ITS published by the ESMA and EBA.
1. RTS on the notification by certain financial entities of their intention to provide crypto-asset services
The information to be provided by the notifying entities should be sufficiently detailed to assess whether the notifying entity meets the relevant requirements. Detailed information contains, among others, a program of operations including a business continuity plan, the arrangements to ensure continuity and regularity in the performance of its crypto-asset services, a description of the internal control systems and procedures to detect and prevent market abuse.
The notifying entity need to submit their notification to the National Competent Authority (NCA) of their home Member State.
2. RTS on the authorization of CASPs
The information to be provided in an application as CASP should be sufficiently detailed to enable competent authorities to assess whether an applicant meets the relevant requirements. It is essential that the applicant provides corporate documents including business continuity and disaster recovery plans, a program of operations, information describing the applicant’s prudential safeguards, detailed information on their mechanisms, systems and procedures on preventing AML and terrorist financing risks and documents to prove that management members meet the applicable integrity requirements. The NCA should retain the right to request additional information from the applicant during the assessment process. An application for authorization needs to be submitted to the NCA of the CASP’s home Member State.
3. RTS on the identification, prevention, management and disclosure of conflicts of interest
CASPs should take into account the scale, nature and range of crypto-asset services provided, including, where relevant, circumstances related to the fact that the crypto-asset service provider belongs to a group. In order to ensure that conflicts of interest rules meet their objective, CASPs should ensure the identification, prevention and management of conflicts of interest. It is essential that CASPs ensure that their remuneration policies and practices for all persons who could have an impact on the service provided or corporate behavior of the CASP do not create conflicts between the interests of clients and those of the crypto-asset service provider.
4. RTS the proposed acquisition of a qualifying holding in a CASPs
MiCAR states that any person who intends to acquire or increase a qualifying holding in a CASP, must notify the NCA of that CASP and provide specific information to enable the relevant NCA to assess the proposed acquisition or increase of an existing qualifying holding.
The information to be provided by a proposed acquirer of a qualifying holding in a CASP to enable NCAs to carry out the prudential assessment of the proposed acquisition is proportionate and adapted to the nature of the proposed acquirer and the proposed acquisition. In order to enable the NCA of the target entity to assess the reputation of that proposed acquirer information on the identity (acquirer, beneficial owners and persons who effectively direct the business) needs to be provided. Furthermore, it is important for the NCA of the target entity to assess whether the existence of any potential conflicts of interests could affect the financial soundness of the proposed acquirer.
5. RTS on complaints handling procedures
CASPs should provide their clients with easy access to a clear, understandable and up-to-date description of their complaints-handling procedure on their website. Clients should be able to file their complaints using a harmonized template with the ability to use all languages used by the CASP to market its service. CASP should inform the complainants about any updates, or request additional information timely, regarding their complaint.
6. ITS on standard forms, templates and procedures for the notification by certain financial entities of their intention to provide crypto-asset services
The notifying entity / applicant shall use specific standard forms when submitting or changing its notification to the NCA. The NCA shall send an acknowledgement of receipt and its decision to the notifying entity / applicant.
7. ITS on standard forms, templates and procedures for authorization of CASPs
The notifying entity / applicant shall use specific standard forms when applying for an authorization as a CASP.
B. Consultation Paper EBA
On 12 July 2023, the EBA also submitted for consultation three documents containing draft technical standards with reference to asset-referenced tokens under the MiCAR Regulation.
In particular, EBA’s technical standards cover:
1. the requirements, templates and procedures for the handling of complaints by issuers of asset-referenced tokens (ARTs) (RTS under Article 31(5), MiCAR)
This draft RTS sets out definitions of complaints and complainants, requirements related to the complaints management policy and function, provision of information to holders of ARTs and on templates and recording. They then proceed with requirements about the procedure to investigate complaints and to communicate the outcome of the investigations to complainants and specific provisions for complaints handling involving third-party entities.
2. the content of the application for authorization to offer ARTs to the public or request their admission to trading (RTS ex Art. 18(6), MiCAR)
The information to be provided in an application for authorization to offer ARTs the public or to seek admission to trading of an ART should be sufficiently detailed. Detailed information contains, among others, a program of operations encompasses a business plan including the financial forecasts. The application shall demonstrate that shareholders and management members are of good repute.
3. the formats, templates and standard procedures for the information to be included in the application for authorization (ITS ex Art. 18(7), MiCAR)
An applicant should use a specific standard form when submitting or changing its notification to the NCA. The competent authority shall immediately notify the applicant if any required information is missing. The competent authority shall send an acknowledgement of receipt and its decision to the applicant
4. the requirements for information on projects to acquire a qualifying holding of ART issuers (RTS ex Art. 42(4), MiCAR)
The draft RITS sets out the information the NCA will require for an assessment of the proposed acquisition of a qualifying holding in issuers of ARTs under MiCAR. This information covers five criteria relating to (a) the reputation of the proposed acquirer, (b) the suitability of any person who will direct the target undertaking, (c) the financial soundness of the proposed acquirer, (d) the sound and prudent management of the target undertaking following the acquisition and (e) suspicion that money laundering of terrorist financing is committed or attempted or that it may increase following the acquisition. This information broadly aligns with the assessment criteria applicable to the acquisition of qualifying holdings in financial undertakings.
If you have further questions on the scope or implications of MiCAR for your business, please do not hesitate to contact Stibbe’s Financial Regulation Team.