EU Legal Framework For Markets In Crypto-Assets & Introducing Stablecoins. What’s Next? – Technology


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EU Legal Framework For Markets In Crypto-Assets & Introducing Stablecoins. What’s Next?


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The European Commission has recently issued a draft proposal [https://ec.europa.eu/finance/docs/law/200924-crypto-assets-proposal_en.pdf]
for a potential and upcoming Regulation of the European Parliament
and of the Council on Markets in crypto-assets (MiCA) with the
purpose of creating a legal framework within the European Union in
its effort to assert certainty by establishing uniform rules on
crypto-assets service providers and issuers on EU level currently
not covered under existing financial services legislation. The goal
would be to surpass numerous challenges encountered by investors
and Service Providers on a transnational level that may be limited
by limitations presented by different requirements for transparency
and disclosure in relation to issuance and offering purposes
imposed on crypto-assets by domestic legislation by each Member
State.

The proposed Regulation is divided in seven titles. Among the
provisions which set up the subject matter, it is worth mentioning
that crypto issuers may proceed with offerings or have
crypto-assets admitted to trading only if they provide a whitepaper
authorized by the competent authorizes. Its disclosure to the
public will not be necessary for SMEs for cost saving purposes
under certain capital requirements. The whitepaper deals with
capital and governance requirements, rules on conflicts of
interest, rules on the stabilization mechanism and the reserve of
assets backing the asset-referenced tokens and requirements for the
custody of the reserve assets for issuers when seeking approval to
set up trading platforms for crypto-assets. In turn, the competent
authorities of the Member State regulating the legal entity will
decide whether the crypto asset qualifies as a financial instrument
under MiFID II or as electronic money under Directive
2009/110/EU.

Moreover, holders of e-money tokens (often called stablecoins)
shall be authorised by an E-Money Institution and will be provided
with a claim on the issuer: stablecoins shall be issued at par
value on receipt of funds and upon request of the holder of e-money
tokens, the issuer must redeem them at any moment at par value. The
provisions of authorization and operating conditions regulating the
trading platform that will be providing services related to custody
of crypto-assets, exchange of crypto to fiat currency or other
crypto-assets, execution of orders, placement of crypto-assets,
reception and transmission of orders are also covered under Title
V.

The proposal targets to set in general a robust legal framework
and co-ordinate the national authorities with ESMA and EBA to
safely supervise and regulate the issuing and offering of
crypto-assets while minimizing their value volatility and
money-laundering discrepancies that are currently connected with
the use of crypto-assets. In an era where digitization of payments
becomes essential for speedy transactions it is evident that
crypto-assets cannot be left unregulated as they form an
alternative means of payment and with the backing up by reserve
assets they could become a credible means of exchange and store of
value while maintaining consumer protection.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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