MiCA: Be compliant from day one

What does MiCA regulate?

MiCA was developed to help streamline distributed ledger technology (DLT) and virtual asset regulation in the European Union (EU) whilst protecting users and investors. In doing so, the regulation goes hand in hand with anti-money laundering and counter-terrorist financing (AML / CFT) laws.

The objectives of MiCA are:

• Ensure investor protection and market integrity, while consideration of the risks associated with crypto assets
• provide legal certainty for crypto assets not covered by any existing financial regulation
• Support innovation by promoting the development of crypto-assets and the wider use of distributed ledger technology (DLT
• ensure financial stability  through specific regulations for cryptocurrencies subject to price pegging mechanisms (so-called “stable coins”).

‍What assets does MiCA cover?

The regulation will cover the following three types of crypto assets:

1. Utility tokens issued for non-financial purposes to digitally provide access to an application, services or resources available on DLT networks.
2. “Asset-referenced tokens” which aim to maintain a stable value by “referencing several currencies that are legal tender, one or several commodities, one or several crypto-assets, or a basket of such assets.” and subsequently act as a means of payment to buy goods and services and as a store of value.
3. “e-money tokens”: crypto-assets with a stable value based on only one fiat currency that aims to function similar to electronic money (replacing fiat currency in payments), as defined in the EU”s Directive 2009/110/EC.

‍To whom does the regulation apply?

The expected regulation will affect all Crypto-Asset Service Providers (“CASPs”),i.e. any natural or legal person “whose occupation or business is the provision of one or more crypto-asset services to third parties on a professional basis”.

In this context ‘crypto-asset service’ is defined as any of the following services and activities:

1. custody and administration of crypto assets on behalf of third parties;
2. operation of a trading platform for crypto assets.
3. exchange of crypto assets for fiat currency that is legal tender;
4. exchange of crypto-assets for other crypto-assets.
5. execution of orders for crypto assets on behalf of third parties;
6. placing of crypto assets;
7. the reception and transmission of orders for crypto assets on behalf of third parties
8. providing advice on crypto assets

What are the future requirements ?

As part of the decision-making process, the committee made concrete suggestions on what shall be the Obligations for all crypto asset service providers:

• information on the environmental and climate-related impacts of each crypto-asset  for which services are offered must be provided on the website. Our cleversoft SFDR service will include the appropriate tools.
• internal controls and procedures for the prevention, detection and investigation of money laundering, terrorist financing and other criminal activities in accordance with the Money Laundering Regulation must be demonstrated. The cleversoft Financial Crime Suite, which already includes Crypto Fraud Case Handling in ForensicCloud and cleverKYC, will be extended to screen and monitor crypto transactions.
• adequate customer due diligence procedures shall be be applied and evidenced. The identity of customers must be established and verified using documents, data or information obtained from a reliable and independent source.  Internal control mechanisms and procedures should provide for enhanced due diligence measures for customers that wish to transfer crypto-assets to or from unhosted wallets; This will be covered by  cleverKYC Service’s connected 3rd party ID verification tools.
• report immediately to the competent authorities any reasonable suspicion that funds, regardless of the amount involved, are the proceeds of criminal activity or are related to the financing of terrorism or other criminal activity, and provide all necessary information directly to the competent authority upon request. Our ForensicCloud Special Investigations Servicewill help in identifying, investigating and reporting suspicious transactions to for instance FIU.
• the relevant authorities shall be notified without delay of any reasonable suspicion that crypto assets may be the proceeds of criminal activity or may be linked to the financing of terrorism or other criminal activity.

Since the majority of these suggestions are in line with the already existing AML Directives, the Cleversoft Financial Crime Suite including CleverKYC and ForensicCloud is prepared to also fulfill the obligations that MiCA will introduce for Crypto Asset Service Providers. MiCA is primarily meant for the Crypto Asset Service Providers. As far as currently public, your service will not need specific adjustments. We will stay on top of any changes and inform you accordingly if it does.

In addition, there are further requirements, depending on the type of crypto-asset services: I.e. taking into account the knowledge and experience of their clients in relation to crypto-asset investments, or, in the case of the placement of crypto-assets, the obligation to explain transaction costs and fees, timing, procedure, price, etc.; The respective cleversoft services will provide the relevant facilities for this purpose.

What is the timing?

Following  the Parliament´s vote in March 2022 the MiCA draft is now shifting to a “trilogue”, a formal round of negotiations between the European Commission, Council and Parliament.

It is expected that a “Level 1” regulation will enter into force towards the end of 2022. After a period of about 18 months, the RTS (Regulatory Technical Standards) can be expected.

cleversoft will guide you through the entire process and ensures that you are fully compliant at all times.

• 24 September 2020: Adoption by the Commission of the proposal for a regulation on Markets in Crypto-Assets
• 19 February 2021: European Central Bank opinion
• 24 February 2021: European Economic and Social Committee opinion
• 24 June 2021: European Data Protection Supervisor opinion
• 17 March 2022: The Committee on Economic and Monetary Affairs adopted the report on the proposal for a regulation of the European Parliament and of the Council on markets in crypto-assets and amending Directive (EU) 2019/1937
• End 2022 (expected):  Final Regulation to be adopted
• Mid 2024 (expected): Releases of RTS (Regulatory Technical Standards) with details requirements for implementation