Here’s How EU Nations Are Preparing to Enforce MiCA

The Markets in Crypto-Assets (MiCA) regulation, which aims to create a harmonized regulatory framework for crypto assets across the European Union (EU), is expected to come into effect on December 30, 2024. However, different EU member states are implementing varying transitional periods and approaches to licensing crypto firms under the new regime.

As a researcher focusing on the European Union (EU), I would emphasize that this year marks a significant milestone as the 27 member states prepare to implement the EU’s groundbreaking crypto regulations. It is crucial for businesses aiming to operate within the EU to closely monitor the actions of national authorities regarding these policies.

As a researcher studying the regulatory landscape of cryptocurrencies, I can tell you that starting in a few months, specialized rules for stablecoin issuers under the Markets in Crypto Assets (MiCA) regulation will become effective. Following this, there will be licensing and other requirements that crypto firms must meet by December.

As a regulatory analyst, I’m excited to share that the Markets in Crypto-Assets (MiCA) regulation was enacted in 2023 following three years of meticulous work by European governments. Once MiCA takes effect, crypto businesses like issuers, exchanges, and wallet providers will enjoy the freedom to operate across the entire European Union. All they’ll need is a license granted by any EU member state.

Each jurisdiction is required to convert the EU-wide regulation on crypto into local legislation, choose which regulatory body will be responsible for cryptocurrencies, and get ready to approve applications from token issuers and related service providers.

As a crypto investor, I can say that for EU countries like Germany and France, which have already implemented stringent regulatory frameworks for cryptocurrencies, the arrival of the Markets in Crypto-Assets (MiCA) regulation might not bring about major changes. However, for other countries with less developed crypto regulations, this shift could be significant and may impose new responsibilities on local authorities.

Twenty-seven regulatory bodies and government agencies in response to inquiries from CoinDesk shared their perspectives and updates regarding the MiCA regulation by the deadline. The nations are at different levels of readiness.

Approximately ten countries have completed or are nearing completion of local legislative processes. A few more are making progress, but have some way to go. Experts believe there’s still ample time for those behind to catch up.

According to Sophie Lessar, a partner at law firm DLA Piper specializing in fintech and digital financial services, MiCA (Markets in Crypto-Assets) is a EU-wide regulation with the power to take effect instantly across the European Union on specified dates.

During her interview with CoinDesk, she stated, “The rules will take force without delay. No regulatory action will impede this.”

“Nonetheless, certain technical prerequisites need to be addressed on a national scale, according to Lessar,” is one way to paraphrase this sentence in natural and easy-to-read language.

As MiCA’s more adaptable technical provisions are left to national authorities to implement, crypto businesses must readiness themselves for compliance. Familiarize yourself with the subtleties of how each country plans to execute aspects like grandfathering durations and supervision fee frameworks.

“The essential aspect is for individuals to understand how this impacts my business. In which locations do I operate? Are there any variations in implementation allowed by MiCA for national authorities?” Lessar explained.

Picking watchdogs

As a European crypto investor, I’m keeping a close eye on the implementation of MiCA (Markets in Crypto-Assets) regulation across different countries. Each nation is at different stages of adapting this law into local legislation. A crucial decision to be made is identifying the regulators responsible for overseeing crypto activities within each country, which are referred to as National Competent Authorities (NCAs) in MiCA text. Moreover, countries have the option to make use of a transitional period granted under this regime before enforcing all regulations fully.

As a crypto investor following the MiCA regulation development, I’ve noticed that there is an anticipated division of supervisory responsibilities between a country’s markets regulator and central bank regarding stablecoins. Marina Markezic, co-founder of the European Crypto Initiative (EUCI), has been closely monitoring national legislation progression and shares this expectation.

Under French law, specifically Article 9 of Law no. 2023-171 passed on March 9, 2023, France has assigned its financial markets regulator, the Autorité des marchés financiers (AMF), and banking supervisory body, the Autorité de contrôle prudentiel et de résolution, as the MiCA supervisors for regulatory oversight in France. The AMF communicated this information to CoinDesk.

The Autorité des Marchés Financiers (AMF) is currently harmonizing the regulations for digital asset service providers under its jurisdiction with the authorization conditions outlined in the Markets in Crypto-Assets (MiCA) framework.

In simpler terms, Croatia intends to follow a comparable structure in which, upon passing the national law, the responsibilities under MiCA (Markets in Crypto-Assets) will be shared between the Croatian National Bank and Hanfa, according to Hanfa’s disclosure to CoinDesk.

“Hanfa is responsible for granting licenses and overseeing the activities of crypto-asset service providers according to the regulations set by MICA. Nevertheless, Hanfa does not have the authority to endorse the white papers of crypto assets,” the regulatory body announced.

In certain countries like Slovakia and Hungary, there is only one financial regulatory body overseeing crypto matters. Consequently, the responsibility for cryptocurrency regulation falls exclusively to their central banks, as confirmed by the National Bank of Hungary (MNB) in relation to their domestic MiCA legislation.

While it primarily concerns organizational issues, the potential exists for regulatory bodies to become overwhelmed by the volume of licensing demands.

Rosvaldas Krušna, an advisor to the Board of the Bank of Lithuania, acknowledged that the requirement for crypto companies to secure approval will pose substantial hurdles for the central bank in terms of processing licensing applications.

With approximately 580 crypto asset service providers present in Lithuania, the Bank of Lithuania took proactive measures to ensure readiness. I personally believe we are well-prepared for this scenario. We have invested substantial resources towards preparation, not just in hiring extra personnel but also in acquiring necessary tools for effective supervision.

According to EUCI’s policy expert Anja Blaj, Slovakia’s financial market might not be sufficiently substantial to justify the existence of a second regulatory body.

“Blaj added that the European Union’s fragmentation in its member states’ operations and financial markets is still a significant issue. Although there are numerous regulations, the situation remains heavily influenced by each individual member state.”

As a analyst involved in the discussions between Blaj and the EUCI team, I can confirm that we’ve been engaging with industry representatives from various member states. Each country’s crypto sector expresses unique apprehensions regarding the implementation of new regulations and proposed laws. Additionally, they are keenly interested in identifying which national regulatory authorities (NCA) will be responsible for overseeing these matters within their respective jurisdictions.

National legislation

According to information shared with CoinDesk by regulatory bodies, Austria, Estonia, Denmark, and Croatia are the countries whose legislatures have yet to give final approval to bills that will bring their national laws in line with MiCA regulations.

Tobias Thygesen, head of the Danish Financial Supervisory Authority’s (DFSA) Fintech, Payment Services and Governance Division, announced that the Danish Parliament is in the midst of passing legislation which will require the DFSA to serve as Denmark’s competent authority for the Markets in Crypto-Assets (MiCA) regulation. This legislative adoption is anticipated to occur during the spring season.

In the latter half of 2024, Croatia intends to pass legislation to align with the Markets in Crypto-Assets (MiCA) regulations. According to Hanfa, Croatia’s financial regulatory body, this implementation is scheduled. Meanwhile, Portugal’s central bank disclosed that they have not yet appointed a national competent authority for these MiCA rules.

Authorities in Ireland, Slovenia, Poland, and Lithuania have made their draft legislation regarding this matter available for public consultation, according to information obtained by CoinDesk.

In Belgium, Bulgaria, Greece, Malta, Romania, Slovakia, and Sweden, regulators did not provide comments or responses by the deadline for this article. Regulators from Italy and the Czech Republic chose not to comment on the matter.

Grandfathering

One aspect in which countries may vary when enforcing MiCA (Markets in Crypto-Assets) regulation is through their grandfathering duration. This refers to the length of time cryptocurrency firms are permitted to carry on their businesses under previous regulations while making the shift to the new regulatory framework, according to Lessar.

When crypto companies initiate business in the EU, they must carefully maneuver through differing transition phases.

As a researcher examining the MiCA regulation, I’ve come across the provision allowing member states a flexible transition period of up to 18 months. However, the European Securities and Markets Authority (ESMA), which oversees financial markets in the EU, has recently advocated for shortening this period to only 12 months.

The National Securities Market Commission of Spain (CNMV) informed CoinDesk that Spain will grant a 12-month transition period during which both MiCA-compliant and non-compliant crypto businesses can legally operate.

The CNMV stated that NCAs will face a significant test in implementing MiCA and the EU’s cybersecurity regulation, DORA. To help clarify these distinctions for users, regulators must put forth a substantial effort. In preparation for this undertaking, the CNMV intends to recruit approximately 70 new team members to focus on MiCA and DORA.

As a researcher, I’ve discovered that Finland is currently undecided about instituting a transition period for cryptocurrency businesses based in the country. The reason being, the Finnish Financial Supervisory Authority (FIN-FSA) is still working on drafting the national legislation.

“Elina Pesonen, the market supervisor at FIN-FSA, shared with CoinDesk her expectation that the Finnish parliament will pass the legislative proposal. She anticipates that the national legislation will be adopted during the first half of 2024.”

Starting January 1, 2025, Latvia’s central bank, Latvijas Banka, intends to initiate the licensing procedure and welcome applications following a six-month grace period for existing crypto businesses, as announced by Marine Krasovska, head of the bank’s financial technology supervision department. To facilitate the application process, the bank will conduct preliminary assessments of crypto companies aiming to legally operate in Latvia.

As a financial analyst, I can share that starting from April 22, 2024, the Dutch Autoriteit Financiële Markten (AFM) has initiated the acceptance of licensing applications from crypto firms. If granted approval, these licenses will become active upon the implementation of the Markets in Crypto-Assets (MiCA) regulation on December 30, 2024. It is important to note that the Dutch Central Bank (DNB) will be responsible for overseeing stablecoin regulations within this framework.

From what Croatia’s Hanfa told CoinDesk, it might make use of the full 18 months of grandfathering.

By the end of 2026, individuals and entities included in the registry by the close of 2024 will have the opportunity to utilize the MiCA transitional period for adjusting their operations to comply with MiCA regulations. This period allows them to eventually obtain authorization from Hanfa to legally operate as crypto-asset service providers. However, new entities that did not provide crypto-asset services before the end of 2024 and aim to commence operations afterward must secure licensing from Hanfa prior to providing any such services.

Looking ahead

Regulating bodies responsible for granting licenses to crypto companies for the first time anticipate a larger workload. In response, Spain’s CNMV is considering hiring additional staff, while other regulatory bodies are either expanding their teams or providing necessary training to prepare for the upcoming challenges.

“Spain’s CNMV stated that national regulatory bodies have been actively adjusting their resources to meet the requirements.”

As an analyst, I can share that Denmark’s Financial Supervisory Authority (DFSA) will commence accepting applications from companies once the nation completes its legislative process. Notably, DFSA has established a specialized team, referred to as the “dedicated MiCA team,” for overseeing the implementation of this regulatory framework.

To address the complex issues presented by MiCA (Markets in Crypto-Assets) regulation, Hungary’s National Bank (MNB) has implemented several structural adjustments and created a specialized team to manage MiCA-related tasks.

According to Markezic from the EUCI, under MiCA, countries will have the ability to determine their own licensing and compliance fee structures. This approach is expected to encourage businesses to thrive in the EU rather than discourage them.

As a crypto investor, I understand that each member state holds significant autonomy over its financial markets. We each possess our unique ecosystems, and as a result, there’s a strong desire to attract as many projects as possible to our respective markets. By doing so, we can bolster our competitive edge against other members, ensuring the long-term success of our individual ecosystems.

Concurrently, regulatory bodies such as France’s Autorité des Marchés Financiers (AMF) have disclosed to CoinDesk that they are collaborating with the European Securities and Markets Authority (ESMA) and European Banking Authority (EBA) during their deliberations on the technical specifications under MiCA.

The Executive Director of ESMA, Verena Ross, explained to CoinDesk how ESMA will contribute to the implementation of MiCA by providing more specific instructions to the market and fostering collaboration among regulators.

As a crypto investor, I’m keeping an eye on the regulatory landscape and anticipate that June could mark the beginning of the process for the release of technical standards and guidance for public comment regarding cryptocurrencies. The goal is to have these regulations finalized by the end of the year.

EU policymakers are considering broadening the reach and strengthening certain regulations within MiCA (Markets in Crypto-Assets).

“BaFin, Germany’s crypto regulatory body, considers MiCA a significant initative in overseeing the provision of cryptoasset services. This framework lays the groundwork for future regulatory developments, including the areas of pooling, lending, and staking or asset loaning for a fee. BaFin intends to be an active participant in shaping these upcoming regulations.”

Enforcement-wise, things largely seem to be moving along as they should be.

As a researcher following the progress of the European Commission’s Markets in Crypto-Assets (MiCA) regulation, I can confirm that the delegated acts and implementing rules are currently being implemented on schedule. It is essential to note, however, that only the provisions related to “stablecoins” (specifically titles 3 and 4) will become effective at the end of June.

The rest is “a full summer and a full autumn and even some of winter away,” he added.