Physical bitcoins on a reflective surface

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The new regulation indicates increasing market maturity and creates a higher bar for compliance, levelling the playing field. Bill Lumley reports.

While bitcoin and its ilk are hardly new kids on the block anymore, it remains the case that much of the activity surrounding crypto assets continues to happen within a legal grey area.

Within the EU at least, however, that all looks set to change. Last month, the European Parliament approved perhaps the most significant regulatory framework yet seen for governing crypto, with its markets in crypto assets (MiCA) rules.

MiCA aims to bring parity between the standards expected of digital asset companies and existing financial institutions.

There are certain fundamental measures institutions must pursue to comply with this new regulation due for implementation across the EU, which is expected to apply from late 2024.


Broadly speaking, issuers will need to provide complete and transparent information about whatever crypto assets they issue. They must also comply with disclosure and transparency rules, be suitably registered, as well as meet an obligation to implement security and anti-money laundering measures.

Michael Levens, global head of payments at consultancy Delta Capita, says the rules will only apply if a crypto asset, or crypto service, is offered in Europe or tied to a European fiat currency.

If banks issue stablecoins, or asset-referenced tokens and e-money tokens, then they will be required to issue a whitepaper describing it. This is to be based on the EU Prospectus Regulation and is in effect a mini prospectus.

“Issuers will have to act honestly, fairly and professionally; communicate with holders of crypto assets in a clear and not misleading manner; prevent, identify, manage and disclose conflicts of interest that may arise; maintain effective administrative arrangements and maintain their systems and security access protocols to an appropriate standard,” he says.

“For banks [in this category], this is likely to be a similar regulation to MiFID II and is likely to require extensive staff training to embed the regulation in product development and associated teams. They must [also] ensure that marketing departments are aware and ensure compliance,” says Mr Levens.

However, he says for issuers of asset-referenced tokens there are some additional key regulations, among them the fact that issuers will have to comply with prudential requirements and hold reserve assets in custody, segregated from own funds and unencumbered. 

MiCA also introduces new governance and risk control requirements, explains Mr Levens, and while such requirements are already likely to be addressed within banks’ existing systems and processes, they will need the right qualified people to understand the specific risks.

Issuers must also publish information on their practices, on any event that may have a significant impact on the value of the tokens, as well as conflict of interest policies and complaints handling processes. “This again is something that banks are already regulated for,” says Mr Levens.

Crypto asset service providers

“Any providers of crypto asset services will have to apply for an EU licence and be subject to a mini MiFID II review,” he says. 

Mr Levens suggests that for banks in this crypto asset services category, many of these requirements, other than obtaining the necessary licence, are likely to already be covered by their existing practices for MiFID II compliance. “Therefore, apart from being appropriately staffed with qualified people, the actual regulated regime will be one that banks are used to and will be able to accommodate within existing structures,” he says.

Either [banks] on-board and adapt, or they do not, and instead concentrate on more traditional services

Aurélia Viémont

Mr Leven adds that this may, in the long run, force non-bank crypto service providers into mergers with banks, as the cost of undertaking the regulatory requirements may prove to be expensive.

Two choices on MiCA

Aurélia Viémont, banking and finance partner in charge of regulatory matters at law firm CMS, Luxembourg, says banks essentially have two choices with regard to MiCA. “Either they on-board and adapt to the undeniable evolution of the market enabling them to remain competitive in the crypto business, or they do not, and instead concentrate on more traditional services,” she says. 

“But looking at today’s generation, I think crypto is now part of our world and there is a business case for traditional banks to adopt and embrace that world.”

Ms Viémont says the advantages of the regulation are threefold. “The first is that there are certain rules and requirements to ensure consumers are protected. The second advantage is regaining trust in the market and the third is accountability.

“If crypto service providers are conducting an exchange between fiat and crypto – for example, they are going to be subject to certain requirements, the main one being that they must be authorised to carry out their services. Once authorised, they will be supervised to ensure they comply with these requirements,” she continues.

This means the banks in question will be reassured that when dealing with crypto service providers, these providers are compliant with anti-money laundering and counterfeit terrorist financing obligations. This in turn will result in trust in the markets, she suggests. “I’m very optimistic because MiCA is creating a level playing field,” she says.

Paul Olukoya, managing director, business risk services at Grant Thornton UK, says: “Whether you believe in ‘first mover’ or ‘second mover’ advantage, the banking industry itself should, in time, become more receptive to offering services to licensed crypto businesses.”

This article first appeared in FinReg Specialist, a new service by the Financial Times.


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