Author: Sandali Handagama, Coindesk; Compiler: Tao Zhu, Golden Finance
EU member states are preparing to implement MiCA, a landmark crypto law that requires national regulators to license and supervise service providers.
MiCA is an EU-level regulation, but countries can implement slightly different technical standards, which cryptocurrency companies should strictly follow, policy observers said.
The 27 EU member states are preparing to implement their landmark crypto law this year, and companies looking to do business in the bloc should pay attention to the actions of national authorities, policy observers said.
In a few months, the Markets in Crypto Assets (MiCA) regulation, which regulates stablecoin issuers, will take effect, followed by extensive licensing and other requirements for crypto companies in December.
After European governments spent three years developing a regulatory framework, MiCA was voted into law in 2023. Once it comes into force, cryptocurrency companies such as issuers, exchanges, and wallet providers will be able to operate throughout the EU if they are licensed in any member state.
This means that each jurisdiction must translate EU-wide regulation into local law, choose which regulator will oversee cryptocurrencies, and prepare to authorize token issuers and other service providers.
For some EU countries that have chosen to regulate cryptocurrencies internally through a strict regime (e.g. Germany, France, etc.), the transition to the MiCA era may not be a major shift. For some other countries, the change may be significant and impose new burdens on local authorities. CoinDesk contacted regulators and government departments in all 27 countries to ask about their thoughts and progress on MiCA, and 20 of them responded as of press time. The countries are at various stages of preparation. At least 10 countries are finalizing or have already finalized local legislation. Other countries are not as advanced, but experts say there is still time to get everything in order. Sophie Lessar, a partner at law firm DLA Piper who focuses on fintech and digital financial services, said MiCA is an EU-wide regulation, meaning it takes effect directly across the bloc within an agreed-upon deadline. “The rules will come into force. There is nothing any regulator will do to prevent that,” she said in an interview.
However, Lessar added, there are some technical requirements that must be implemented at the national level.
While national authorities decide how to implement some of the more flexible technical standards under MiCA (such as how long its exemption periods will last or what the regulatory fee structure will look like), crypto businesses should also prepare for compliance and be aware of the nuances of implementation at the national level.
“The key is for people to understand, what does this mean for my business? Where do I do business? And if national authorities have the ability under MiCA to implement it slightly differently, are there any differences?” Lessar said.
Choosing a regulator
European countries are at different stages of translating MiCA into local law, which may involve deciding which local regulator will be responsible for regulating cryptocurrencies — referred to in the MiCA text as a national competent authority (NCA) — and deciding whether to take advantage of the transition period allowed by the regime.
Marina Markezic, co-founder of the European Crypto Initiative (EUCI), which has been tracking national legislative progress, said that With MiCA, one expects that local regulatory responsibilities may be divided between a country’s market regulator and central bank (for handling stablecoins).
For example, France has designated its financial regulator AMF and banking regulator contrôle prudentiel et de r as its MiCA regulators, pursuant to French Law No. 9.
The AMF noted that it is working to align its existing regulatory requirements for digital asset service providers with the authorization requirements under MiCA.
Croatia aims to have a similar mechanism in place, with MiCA duties to be split between the Croatian National Bank and financial regulator Hanfa once national legislation is passed.
“Hanfa will issue licenses to and oversee the operations of crypto-asset service providers… However, Hanfa will not approve crypto-asset white papers, as required by MICA,” the regulator said in a statement.
Markezic said that some countries, such as Slovakia and Hungary, do not have two financial regulators, so cryptocurrency regulation will fall solely under their central banks.Hungary’s central bank, the MNB, confirmed that it was designated as the country’s cryptocurrency regulator through national MiCA legislation.
While this is more of an organizational issue, there is a risk that regulators could become overburdened by licensing requirements.
The new need for cryptocurrency companies to get approval “will create significant challenges for the central bank, which is responsible for handling licensing matters,” said Rosvaldas Krušna, an adviser to the Bank of Lithuania’s board of directors.
“Given that there are about 580 (crypto-asset service providers) in Lithuania, the Bank of Lithuania started preparations well in advance and we believe we are well prepared,” Krušna said. “We have invested a lot of resources in preparation, including additional personnel and the tools needed for supervision.”
EUCI policy expert Anja Blaj said Slovakia may not have a large enough financial market to establish a second regulator.
“I would say that this is also related to the overall fragmentation of how EU member states operate and the differences in financial markets,” Blaj continued. “Because it’s still a member state-specific thing, even though we have a lot of regulations, or there will be more regulations in this area, it’s still member state-specific.”
Blaj and the EUCI team have been speaking with industry representatives from member states, who said the crypto industry in each country has its own concerns about implementation, proposed laws, and the development of NCAs.
National Legislation
According to the regulator, parliaments in countries such as Austria, Estonia, Denmark and Croatia still need to approve draft national legislation to align with the MiCA.
“The Danish Parliament is currently passing national legislation which will authorize the Danish Financial Supervisory Authority (DFSA) to become the national competent authority for MiCA in Denmark. “It is expected that this move will be implemented in the spring,” said Tobias Thygesen, Head of Fintech, Payment Services and Governance at the DFSA. Croatia plans to pass legislation to implement the MiCA rules in the second half of 2024, the country’s financial regulator Hanfa noted, while Portugal’s central bank said it has yet to designate a national competent authority. Other countries including Ireland, Slovenia, Poland and Lithuania are also understood to have held public consultations on the draft legislation. Regulators in Belgium, Bulgaria, Greece, Malta, Romania, Slovakia and Sweden had not responded by press time, while those in Italy and the Czech Republic declined to comment. 16px;">
Exemption period
Lessar said that one area where countries may disagree on the implementation of MiCA is its exemption period, or the amount of time crypto firms are allowed to continue operating under the old rules while transitioning to the new regime.
She added that crypto firms will need to tread carefully between the different transition periods when they begin operating in the EU.
While MiCA allowed countries an optional transition period of 18 months, EU market regulators have since called for it to be limited to 12 months.
Spanish financial regulator the National Securities Market Commission (CNMV) said the country would implement a 12-month exemption period under MiCA. Authorized and unauthorized crypto firms will operate “in parallel.”
“This will be a relevant challenge for the NCA,” the CNMV said, adding that the regulator will have to make a “huge” effort to make the difference clear to users. The CNMV said that in preparation, it plans to hire 70 employees to work on MiCA and the EU cybersecurity law DORA.
Finland has not yet decided whether to implement a transition period for crypto firms registered in the country as the country is still preparing national legislation, the Finnish financial regulator FIN-FSA said.
“The legislative proposal must be passed by the Finnish Parliament. The national legislation is still expected to be adopted in the first half of 2024,” noted Elina Pesonen, head of markets at FIN-FSA, in a statement.
The Latvian central bank plans to start the licensing process and accept applications on January 1, 2025, after a six-month exemption period, noted Marine Krasovska, head of the financial technology supervision department at the Latvian central bank. She added that to make the process easier, it will pre-assess cryptocurrency companies interested in operating in the country.
The Dutch financial regulator AFM said it has started accepting licensing applications from cryptocurrency companies from April 22, 2024. If approved, the license will take effect when MiCA comes into force on December 30, 2024. The country’s central bank (DNB) will be the AFM says it is working on stablecoin regulation.
According to Croatia’s Hanfa, it may take advantage of the full 18-month exemption period.
“According to the current draft law, all persons listed in the register (as of the end of 2024) will be able to take advantage of the MiCA transition period (until June 2026), during which they must adapt their operations and obtain Hanfa’s MiCA authorization to operate as crypto-asset service providers.” Hanfa said entities that did not provide crypto-asset services before the end of 2024 and wish to start providing services after that date must obtain a license to provide such services.
Future Outlook
Regulators that are issuing licenses to cryptocurrency companies for the first time expect an increase in workload, and just as Spain’s CNMV plans to hire new personnel, other regulators are also strengthening their teams or providing them with the training they need to cope with the upcoming situation.
Spain CNMV said: “National authorities are already working hard to adapt their capacities and workforce.”
Thygesen said the DFSA would accept applications from firms as soon as Denmark finalises its national legislation and the regulator has set up a “dedicated MiCA team to be responsible for implementation”.
Hungary’s cryptocurrency regulator said: “In order to effectively respond to the challenges posed by MiCA, the MNB has adopted a number of organizational changes and established a dedicated board of directors to focus on MiCA-related matters.”
EUCI’s Markezic said that under MiCA, countries have a say in setting licensing and compliance fee structures, which will hopefully be more conducive to attracting and promoting the development of EU companies rather than acting as a deterrent.
“Member states have considerable sovereignty over their own financial markets. They are their own markets, which means that to some extent, they behave in a way that is similar to, ‘Okay, I now want as many projects as possible to enter my ecosystem because I have the ecosystem that can support it. In a way, this is how I compete with other members,” Markezic said.
Meanwhile, several regulators, including France’s AMF, noted that they are also working with the European Union’s market regulator (ESMA) and the European Banking Authority (EBA) to consult on technical standards under MiCA.
ESMA Executive Director Verena Ross described the regulator’s role in implementing MiCA as providing more detailed guidance to the market and bringing regulators together.
It has set June as a preliminary deadline for regulatory technical standards and public comment guidance, with the end of the year as a deadline for finalization.
EU policymakers are already considering revisions to MiCA that could expand its scope and tighten certain rules.
“MiCA is an important first step towards the regulation of crypto-asset services and their providers,” Germany’s cryptocurrency regulator BaFin noted in a written statement. “It also provides for the further development of regulatory requirements, for example in terms of pooling, lending and staking, i.e. the lending of crypto-assets for a fee. BaFin will play an active role in this process.”
On the enforcement side, things appear to be largely proceeding as they should.
“So far, both the delegated acts and the implementing regulations are on track. Moreover, keep in mind that only the ‘stablecoins’ provisions of MiCA (Chapters 3 and 4) will enter into force at the end of June,” Peter Kerstens, the European Commission’s adviser on digitalization and cybersecurity in the financial sector, said in a statement.
The rest of the time is “a full summer and a full autumn, and even some winter,” he added.
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