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EU signs MiCA bill into law, setting stage for comprehensive cryptocurrency regime

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(Kitco News) - After years of development, officials in the European Union have officially signed the Markets in Crypto-Assets (MiCA) bill into law, setting the stage for the EU to implement a comprehensive cryptocurrency regulatory framework.

On Wednesday, Roberta Metsola, the European Parliament President, and Peter Kullgren, Sweden’s minister for rural affairs, signed the regulatory framework into law, capping nearly three years of work to formulate and amend the legislation.

Now that the signing ceremony has been completed, the framework is expected to go into effect after it is published in the Official Journal of the European Union, with many of MiCA’s regulations on crypto firms likely being implemented sometime in 2024.

The European Parliament conducted its final vote on the bill in April – passing the measure by a vote of 517 in favor and 38 against – after two consecutive delays and extended debates about the finer points of the bill, which looks to create a licensing regime for digital asset service providers in the EU.

In May, the finance ministers of all 27 member states of the EU unanimously voted to approve MiCA, which advanced the bill to be signed by Metsola and Kullgren. As it stands now, MiCA remains on track to become enforceable law by the third quarter of 2024, giving affected parties in the EU time to design their systems to comply with the new law.

MiCA lays out a framework for the European Union’s approach to regulating the cryptocurrency sector. Under the text of the legislation, the issuance of cryptocurrencies will be brought under the wing of institutional regulation, and it establishes a new regime for crypto-asset service providers across the EU’s member states.

The legislation is comprehensive and far-reaching, and its implementation will be carried out in phases. Provisions related to stablecoins could come into force as soon as July 2024, while many of the other provisions won’t take effect until January 2025 at the earliest.

In addition to requiring stablecoin issuers to obtain a license and hold suitable reserves, the legislation allows central banks to intervene in companies’ proposals to issue new stablecoins, referred to in MiCA as ‘asset-referenced tokens.’

It will also require the issuance of the stablecoins to cease if the tokens reach over 1 million transactions per day.

SEC's Peirce says U.S. ‘shooting ourselves in the foot,' EU's MiCA ‘a model' for crypto regulation

While the road to MiCA’s passage has been long, the work is not done for legislators, as several important sectors of the cryptocurrency ecosystem are not addressed in the bill, including non-fungible tokens (NFTs) and decentralized finance (DeFi) applications.

And companies need to tread carefully until MiCA is officially implemented, as noted by the European Securities and Markets Authority (ESMA), which issued a statement last Friday directing financial firms operating in the EU to proactively inform their customers of the regulatory status of the products they offer, with crypto a particular area of concern.

“Specifically on crypto assets, while the Markets in Crypto-Assets Regulation (MiCA) is close to adoption, crypto assets offered by investment firms will continue to be unregulated in most jurisdictions until MiCA applies,” the ESMA warned.

The regulator went on to highlight that until MiCA is fully implemented across the EU, when investment firms offer both regulated and unregulated products and services, “there is a significant risk that investors may misunderstand the protections they are afforded when investing in those unregulated products and/or services,” and may believe that the protections of the regulated ones apply to the unregulated ones.

The ESMA recommends that investment firms “take all necessary measures to ensure that clients are fully aware of the regulatory status of the product/service they are receiving,” and that they “clearly disclose to clients when regulatory protections do not apply to the product or service provided.”

While the ESMA is educating companies on how to prepare for the eventual implementation of MiCA, France is looking to implement the legislation ahead of its EU-wide integration, with the French Financial Markets Authority (AMF) exploring the option of providing companies with a “fast track” option which would allow them to come into compliance with MiCA regulations as soon as possible.

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