MiCa: briefly about the new legal realities

First of all, it should be noted that the new European Union regulation, is a precedent in the field of such a broad and detailed regulation – relationships related to the circulation of virtual assets. In particular, this act, eliminates uncertainty in the legal approaches of national law to crypto-regulation in all EU member states and establishes uniform union-wide and unified rules according to the following:

• transparency and disclosure requirements for the issuance, public offering and admission of crypto-assets to trading platforms for crypto-assets;
• requirements for the authorization and supervision of crypto-asset service providers, issuers of asset-linked tokens and issuers of electronic money tokens, and for their operation, organization and management;
• requirements for the protection of crypto-asset holders upon issuance, public offering and admission to trading;
• requirements for the protection of crypto-asset providers’ customers;
• measures to prevent insider dealing, illegal disclosure of insider information and market manipulation related to crypto-assets to ensure the integrity of crypto-asset markets.

Talking about the basic terminology found in the new wording, the following aspects cannot be overlooked: 

• The well-known “virtual assets” are already mentioned in the context of “crypto-assets” and mean the same traditional representation of value or rights, and the legislator reveals the characteristic of “representation of value” by indicating the external, non-intrinsic value attributed to crypto-assets by interested parties or market participants, which means that value is subjective and based only on the interest of the crypto-asset buyer.
• After consensus, the term “consensus mechanism” appears, which refers to the rules and procedures by which agreement is reached between the nodes of the DLT network that a transaction is validated.
• After consensus, precedent, the definition of “node” as a device or process that is part of the network and stores a full or partial copy of all transaction records in a distributed registry.</nbsp;
• Talking about the supply of crypto-assets, one can’t help but be excited by the delineation of players into 2 types of major players in this process: the “issuer” of crypto-assets and the “offeror” of crypto-assets. Traditionally, this could be the same person.
• Also, the definition of “public offering” appears, which in turn means communicating to persons, in any form and by any means, providing sufficient information about the terms of the offer and the crypto-assets offered so that potential holders can decide whether to purchase these crypto-assets.</nbsp;

The new set of rules not only introduces a uniform European approach to the concept of crypto-assets, but also divides the latter into specific types. The criterion for this division is the nature of such a crypto-asset and its desire to stabilize its value relative to other assets, namely:

• “e-money token” is a type of crypto-asset designed to maintain stable value by reference to the value of one official currency;
• “asset-linked token” is a type of crypto-asset that is not an e-money token and is designed to maintain stable value by reference to another value or right or combination thereof, including one or more. “Service token” refers to a type of crypto-asset that is intended only to provide access to a good or service provided by the issuer of that token.

So, it’s safe to say that stabelcoins are finding their legal regulation alongside all other secured tokens, not to mention the mainstream flurry of the market, altcoins. The lawmaker chose an unusual model of individual perimeter regulation for each of these types of crypto-assets. For example, if in the past the altcoin offer was “shaky” in terms of the risks of recognition of the project as a scam, due to the lack of due diligence of the team in the existence of only intuitive-valuation concepts; in other words, it was difficult to give an objective assessment of how the project looks as “scam” or it can be given the mark “trastble”. Now, the MiCa (hereinafter referred to as the Regulations) provides a clear understanding of the project roadmap to achieve the white history mark. For example, now for a public offering of crypto-assets (not asset-linked tokens and not electronic tokens), a project must have the following components:

• be a legal entity;
• compile a technical crypto-asset document regarding that crypto-asset, in accordance with Article 6 of the Regulation;
• notify about the technical crypto-asset document, in accordance with Article 8 of the Regulation;
• publish the technical crypto-asset document, in accordance with Article 9 of the Regulation;
• prepare marketing communications, if any, with respect to that crypto-asset in accordance with Article 7 of the Regulations;
• publish marketing communications, if any, with respect to that crypto-asset in accordance with Article 9 of the Regulations;
• compliant with the offeror requirements set forth in Article 14 of the Regulations.

It is important to note that certain items may not be applicable to a crypto project if such project would have at least one of the following characteristics, namely: 

• offering of crypto-assets to less than 150 persons or entities from each Member State if such persons are acting on their own behalf;
• within 12 months starting from the beginning of the offering, the total consideration of the public offering of a crypto-asset in the Union does not exceed €1,000,000 or the equivalent amount in another official currency or in crypto-assets;
• offer of a crypto-asset addressed exclusively to qualified investors if the crypto-asset may only be owned by such qualified investors.

The regulations also indicate exceptions to the rules, for example:

• crypto-asset is offered for free;
• crypto-asset is created automatically as a reward for maintaining a distributed ledger or checking transactions;
• the offer concerns a service token that provides access to a good or service that exists or is in operation;
• the owner of the crypto-asset may use it only in exchange for goods and services in a limited network of sellers with a contractual relationship with the offeror.</nbsp;

Investors were also not left out and were offered a right of refund, namely, as a crypto-project you must provide your “consumers” with an opportunity to return such crypto-asset within 14 days of purchase, as a refund by the project (the right does not apply if such crypto-asset is declared on a trading platform).</nbsp;

The second type of tokens that fall under our consideration are “asset-linked tokens”, for which the legislator has chosen other requirements, namely:

• Be a legal entity or other “enterprise” registered in an EU member state and authorized under Article 21 of the Regulation – by the local regulator of its country.
• Being a credit institution under Article 17 of the Regulation.

There are also exceptions, for example: Asset-linked tokens may be issued by entities that are not legal persons (think of FAOs) only if their legal status provides a level of protection for third parties equivalent to that of legal persons. Or, as one example: the offer of such tokens to the public is addressed exclusively to qualified investors, and asset-linked tokens can belong only to such qualified investors, then the above requirements do not apply (but there are also nuances, such as the obligation to have a technical document and notify them in this case). The section regulating the relations between the market participants, which involves exactly this type of token is one of the most capacious in terms of information and necessary documentation and requires each time a detailed study for application to specific projects “case by case”, because the Regulation points out a lot of “buts”.

When referring to e-money tokens, it is worth defining that only issuers of this type (unless delegated by the issuer to a 3rd party) can make a public offering and these can be:

• authorized as credit institution or “e-money institution”;
• have published a white paper on crypto assets and notified the competent authority in accordance with Article 51 of the Regulation.

It is important to note that e-money tokens are considered “electronic money” within the meaning of traditional law that is already operating in the market, namely under Article 2(2) of Directive 2009/110/EC. The lawmaker gives 40 business days before the date issuers intend to offer these e-money tokens to the public or seek their admission to trading, to notify their competent authority of that intention.

A significant innovation is that each of the above types of crypto assets has very individual requirements for offering and existence in the crypto services marketplace. In this regard, the MiCA is both a ray of light on legal uncertainty and a significant bureaucratic tool, killing the abundance of Internet freedom of the embraced web3 world.