Digital finance transformation. Crypto assets. Distributed Ledger Technology (DLT). These topics have created a lot of discussion and excitement, as well as controversies, across the world. EU regulators and many national regulators are adamant that the fast development and risks related to crypto assets and the use of DLT in the financial sector call for legal certainty and meticulous EU-level regulation that will be directly applicable across the EU.
In 24.09.2020 the European Commission (EC) adopted a digital finance (DigFin) package that includes a digital finance strategy and legislative proposals concerning crypto assets and digital resilience that aim to keep the EU financial sector competitive and allow consumers access to innovative financial products, while ensuring consumer protection and financial stability.
Among other features, the DigFin package includes a proposal for the regulation of markets in crypto assets (MiCA) and a proposal for the regulation of a pilot regime for market infrastructures based on DLT (DLTR). Although it takes time to put such proposals through the complex EU processes before they can be passed into law, and bearing in mind that there is currently no specific timeline for the implementation of MiCA and DLTR, it is nevertheless expected to happen within the next few years.
MiCA will cover all types of crypto assets, except those that qualify as any of the following:
- Electronic money as defined in Directive 2009/110/EC (E-Money Directive), except where they qualify as electronic money tokens under MiCA
- Financial instruments and structured deposits as defined in Directive 2014/65/EU (MiFID II)
- Deposits as defined in Directive 2014/49/EU (Deposit Guarantee Schemes Directive)
- Securitisation as defined in Regulation (EU) 2017/2402 (Securitisations Regulation)
In relation to crypto assets covered by MiCA, it sets forth (among others):
- Relevant definitions, e.g. DLT, crypto assets, utility token, asset-referenced token, e-money token, crypto asset service provider (CASP) and crypto asset service, etc.
- Requirements applicable to the issuers of crypto assets, as well as to the issue, offering and admission to trading of such crypto assets
- Requirements applicable to the companies providing services related to such crypto assets, as well as to the services themselves.
DLTR creates a bespoke legal regime for the practical application of DLT in post-trade services.